As Speculation Swirls, Panic Stalks Freddie, Fannie

What started as a whisper Monday is a roar at week’s end as investors wrestle with the fate of mortgage giants Fannie Mae and Freddie Mac, the Wall Street Journal reports. While neither firm, which together own or back roughly half  the nation’s mortgages, faces imminent collapse, awareness that the government is mulling options for a bailout has sent Wall Street into a speculative downward spiral.

While federal officials were at pains to reassure investors yesterday that both are solvent, private banks are wary. “There is a real panic about these companies on Wall Street right now, and sometimes a blaze like that grows almost without reason,” a Freddie veteran tells the New York Times. The uncertainty sparked a selling frenzy yesterday, pushing share prices down another 22% for Freddie and 14% for Fannie, to their lowest in 17 years. (More subprime crisis stories.)