Reports Suggest a Way Out for Fannie and Freddie Holders

Wall Street Journal (08/27/08) P. C3; Hagerty, James R.
New reports from analysts at Citigroup and Goldman Sachs Group suggest that purchasing mortgage securities from Fannie Mae and Freddie Mac would be one way for the government to prop up the mortgage finance giants without hurting shareholders. Goldman says another option is to reduce the minimum capital requirements of the companies, while Citigroup adds that credit-loss estimates indicate they would have enough capital to get through 2008. Meanwhile, Standard & Poor's Ratings Service lowered its ratings on the preferred stock of Fannie Mae and Freddie Mac to BBB-minus from A-minus. S&P says there is "increasing uncertainty" over whether government support "will extend to these securities."