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Fannie Mae, Freddie Mac move to OTC market

07-09-2010 13:46 BJT

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U.S. mortgage-finance giants Fannie Mae and Freddie Mac have delisted their shares from the New York Stock Exchange, and moved to the over-the counter market. Experts say the move shows efforts made by the U.S. government to scramble out from the economic crisis.

Last month, Fannie Mae and Freddie Mac's federal regulator ordered the two companies to delist their shares from the NYSE. The decision was made after the exchange formally notified the government that Fannie Mae no longer met listing standards. Its shares had fallen below the 1 U.S. dollar share-price threshold maintained by NYSE Euronext.

Experts believe the delisting might shed light on the process of their privatization.

Jacob Funk Kirkegaard, Researcher of Peterson Institute for International Economics said "So in economic terms, it doesn't make any particular difference. But I think it will be the first step towards the Obama administration to figuring out what we are going to do to these companies. ...."

The U.S. government took over the companies through a legal process known as conservatorship in September 2008, as rising mortgage defaults threatened to burn through thin capital reserves.

Despite the 145 billion U.S. dollars injected by the government to cure the mortgage giants, their share prices have lingered around the one U.S. dollar mark.

Experts say the problems are deeply rooted in the special responsibilities of the two companies.

Jacob Funk Kirkegaard said "Their roles are really crucial. These are the problems. You can't really seriously restructure and scale down those companies without costing a decline in the housing market...."

Fannie Mae's shares gained 5.7 percent to 26 cents in after-hour trading, while Freddie Mac's dropped 8.8 percent to 31 cents.

But analysts say the real reason of the move lies in the contradiction between government guidance and the benefit of shareholders.

Editor:Xiong Qu |Source:

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