The bailout involves total assets that would dwarf the savings and loan rescue in the 1980s that shook the banking sector to its core. Fannie and Freddie hold roughly $1.5 trillion in direct debt, guarantees on what could be as large as $5 trillion and possibly off-balance sheet obligations that could reach $3 trillion, according to recent estimates from Ladenburg Thalmann & Co. Word of the Treasury Department takeover first came out late Friday, and sent the shares of both companies plunging in after-hours trading, with Fannie Mae giving up 25% of its value and Freddie Mac falling by about 20%. Those losses only added to the misery that has already wiped out approximately 80% of the companies’ share values this year. And the proposed takeover plans, while leaving Fannie and Freddie able to continue operating, will reportedly leave the companies’ remaining shareholders with nearly nothing, diluting the companies’ common stock but not wiping it out. More
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