Their collapse signalled the beginning of the worst recession since the 1930’s and, as Exec Digital discovers in a timeline, highlighted why the world got itself into this mess in the first place.
By James Doran
JULY 13-2008
After a weekend of negotiations, the Treasury and the Federal Reserve announce emergency measures to backstop Fannie Mae and Freddie Mac. The two companies will get access to credit lines, including direct access to Fed money if necessary, and a provision for the Treasury to take an equity stake in the companies if required. The Securities and Exchange Commission announces measures aimed at stemming the spread of false rumours.
JULY 15
SEC Chairman Christopher Cox says the SEC will impose an emergency measure designed to make it more cumbersome to sell short the shares of Fannie Mae, Freddie Mac and 17 other major financial institutions.
Fannie Mae and Freddie Mac shareholders still find no overt assurance regarding the fate of common stock in any government bailout. Freddie Mac shares plunge 26 percent and Fannie Mae plummets 27 percent.
JULY 16-17
Equity investors finally sense some relief as the US government gains some key support for the rescue package. Short sellers begin to back off the stocks ahead of the SEC’s emergency short-selling rules taking effect.
Freddie Mac completes its second successful debt sale of the week, and confidence rises about the fate of the rescue effort moving through Congress. Fannie Mae shares rise more than 18 percent and Freddie Mac adds nearly 22 percent.
JULY 21
Freddie Mac has another successful debt sale, though there is evidence of smaller demand than the previous week’s sale. The SEC’s short-selling restrictions take effect.
Fannie Mae gains more than 5 percent. Freddie Mac falls more than 4 percent.
JULY 23
The House of Representatives approves a housing market support package including a mandate for the US Treasury to provide equity or debt to Fannie Mae and Freddie Mac. The White House drops opposition to other measures in the broad housing bill and pledges to sign it into law.
Fannie Mae shares rise almost 12 percent to $15, their highest close since July 9. Freddie closes up more than 11 percent at $10.80, its highest close since July 8.
AUGUST 6
Freddie Mac posts a loss of $821 million, or $1.63 a share, for the second quarter, its fourth straight quarterly loss. Freddie doubles its provisions for losses and sharply cuts its dividend.
AUGUST 8
Fannie Mae posts a second-quarter loss of $2.3 billion before preferred dividend payments, or $2.54 a share. It is the fourth straight quarterly loss, bringing its cumulative loss over the 12 months to $9.44 billion before preferred dividends. Fannie cuts its dividend and says it will raise loss reserves.
AUGUST 17
Barron’s magazine reports the Treasury Department is increasingly likely to recapitalise Fannie Mae and Freddie Mac in coming months, using taxpayer’s money.
AUGUST 18
Share prices for the mortgage finance companies drop, with Fannie Mae’s price plunging 22 percent to a 16-year low of $6.15 and Freddie Mac’s down 25 percent to $4.39.
US Treasury says it has no plans to use its new authority to backstop Fannie and Freddie by providing equity capital or new loans.
AUGUST 20
The US Treasury confirms that officials from the department and Freddie Mac met to talk about the company’s health and about how it can best weather current economic woes.
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