19 Aug 2008

Wall St tumbles on mortgage company worries

9:02 am on 19 August 2008

US stocks sank on Monday as the prospect of more losses from the mortgage crisis hurt the shares of banks and the two biggest home finance providers.

Fannie Mae and Freddie Mac shed more than 20% each after Barron's reported that the US Treasury may need to bail out the home finance giants, which could wipe out shareholders and effectively nationalize the government-sponsored enterprises.

Fannie Mae shares fell to their lowest level in nearly 20 years.

The Treasury Department responded by saying it had no plans to use its authority to backstop either of the two companies, which own or guarantee about half of outstanding US mortgages.

Shares of Lehman Brothers fell 7% after the Wall Street Journal reported analysts are bracing for the investment bank to report a third-quarter loss of at least $US1.8 billion.

US crude oil futures fell 90 US cents to settle at $US112.87 per barrel, although investors said its price fluctuations were taking a back seat to financial concerns.

The Dow Jones industrial average tumbled 180.51 points, or 1.55%, to 11,479.39. The Standard & Poor's 500 Index lost 19.60 points, or 1.51%, to 1,278.60. The Nasdaq Composite Index slid 35.54 points, or 1.45%, to 2,416.98.