Confidence Crisis at Fannie and Freddie

123jump.com Staff
14 Jul, 2008
New York City

U.S. Treasury Secretary Paulson asked Congress an authority to take a stake in the two troubled mortgage lending agencies Fannie Mae and Freddie Mac. The Secretary also wants to increase lending limits of two agencies and the Fed will open its discount window to lenders. Freddie Mac sold $3 billion in short term debt with higher than average interest from investors. The stocks of two companies remain volatile and investors fear a further decline in their values in the near future.

[R]10:30AM New York – U.S. stocks failed to sustain a rally at the opening. Treasury Secretary Paulson asked Congress to bail out two troubled mortgage lenders Fannie and Freddie.[/R]

U.S. stocks rallied in the morning but quickly fell as Fannie Mae and Freddie Mac fell. Treasury Secretary Henry Paulson, last night before the open of the Tokyo markets said that it will provide financial support to the two largest mortgage lenders and the Fed will open its discount window to Fannie and Freddie.

Secretary Paulson asked more authority from Congress to increase lending to the two lending agencies that are sponsored by the U.S. government. Fannie and Freddie either own or guarantee $5.2 trillion of debt of two agencies, nearly 50% of every mortgage is in the U.S. is backed by these two agencies.

Fannie Mae ((FNM)) traded as low $9.29 and Freddie Mac ((FRE)) lost 15 cents to $7.91. Gold added $4 to $964.60 and crude oil futures declined a fraction.

InBev and Anheuser Busch agreed on a merger terms between two beverage companies. InBev will pay $70 per share or $52 billion for Anheuser Busch and merged company will be named Anheuser Busch InBev.

Banco Santander SA agreed to purchase UK based mortgage lender Alliance Leicester for 1.26 billion pounds or $2.6 billion. The Spain based bank will offer 299 pence a share and pay half-year dividend 18 cents per share.

Apple Inc ((AAPL)) rose $4.51 to $177.05 after it reported a sale of 1 million units of the latest iPhone version.

Earnings Review

M&T Bank Corporation, a bank holding company reported second quarter net income in the quarter declined 34% to $160 million or $1.44 per diluted share compared to net income of $214 million or $1.95 per share, a year ago.

M&T Bank Corporation ((MTB)) in the last one year traded as high as $115.81 in August 2007 and as low as $66.01 in July 2008. Based on the yesterday’s closing price the company has a market cap of $7.67 billion. M&T Bank fell $8.25 to $61.58.

Peregrine Pharmaceuticals, Inc, a biopharmaceutical company reported third quarter revenues increased 64% to $6,093,000 from $3,708,000 a year ago. Net loss in the quarter was $23,176,000 or 10 cents per diluted share compared to net loss of $20,796,000 or 11 cents per share, a year ago.

Peregrine Pharmaceuticals, Inc ((PPHM)) in the last one year traded as high as $0.82 in July 2007 and as low as $0.31 in June 2008. Based on the yesterday’s closing price the company has a market cap of $88.22 million. Peregrine edged 1 cent lower to 38 cents.

Koninklijke Philips Electronics N.V, the world''s largest maker of lighting reported second quarter sales rose 6% to euro 6.46 billion ($10.23 billion) from euro 6.03 billion a year ago. Net income in the quarter dropped 54% to euro720 million ($1.14 billion) or 71 cents per diluted in euros compared to net income of euro1.57 billion or 1.41 per share in euros, a year ago.

Koninklijke Philips Electronics N.V ((PHG)) in the last one year traded as high as $45.90 in October 2007 and as low as $30.65 in July 2008. Based on the yesterday’s closing price the company has a market cap of $32.01 billion. Philips stock rose $1.75 to $32.88 in the morning trading.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 29.53 or 0.23% to 13,010.16, Hang Seng index in Hong Kong decreased 170.09 or 0.77% closed to 22,014.46. ASX 200 index in Australia decreased 58.90 or 1.18% to close 4,921.00. The KL Composite index in Malaysia decreased 6.39 or 0.56% closed to 1,144.00.

The Kospi Index in South Korea decreased 8.89 or 0.57% to close at 1,558.62, SET index in Thailand closed lower 13.23 or 1.81% to 717.06 and JSE Index in Indonesia decreased 17.31 or 0.76% to 2,259.54. The Sensex index in India decreased 139.34 or 1.03% to 13,330.51.