Stock markets suffered another turbulent session yesterday as a US government rescue plan for Fannie Mae and Freddie Mac failed to alleviate fears about the wider financial sector. US regional banks fell sharply after the failure of IndyMac Bancorp on Friday. Anthony Conroy, head of equity trading at BNYConvergEx said: “There are so many fires burning out there among the financials that investors feel the Federal Reserve can’t fight them all. There is a fear that some banks may slip through the cracks.” The US government said on Sunday that it would seek unlimited authority from Congress to lend money to Fannie and Freddie and invest in their equity.
Paul Ashworth, at Capital Economics, said the collapse in the government-sponsored enterprises’ share prices last week had provided another stark illustration that the credit crunch was intensifying further. “The bottom line is that the GSEs cannot be allowed to fail because, with private mortgage companies unwilling/unable to make new loans, their demise would cause a complete collapse in the mortgage market,” he said. “However, the fact that the markets were even ready to contemplate this possibility shows how bad things have got. Even if the authorities are successful in putting out this particular fire, others will no doubt spring up.” More
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July 14th, 2008 at 8:00 pm
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