Losing Fannie and Freddie Would Deal a Blow to Wall Street

MarketWatch (08/21/08); Weidner, David
Fannie Mae and Freddie Mac have experienced double-digit declines in their stock prices recently due to uncertainty over the Treasury's bailout plan, but some experts do not believe the government-sponsored enterprises should be hit so hard given that their subprime and Alt-A mortgage exposures are low and the Federal Deposit Insurance Corp. reports a 2 percent default rate industrywide. However, several players in the financial markets would be hurt by a GSE bailout, with commercial banks forced to generate additional capital due to write downs or sales of GSE debt. Shareholders, fixed-income debt underwriters, large brokerage firms and the derivatives market also would take a hit.