Treasury working to help two U.S. lenders

Washington -- U.S. Treasury Secretary Henry Paulson Jr. Friday said the Treasury was working to help two large mortgage lenders whose share values have plummeted recently.

Investors are worried the Federal National Mortgage Association, known as Fannie Mae, and the Federal Home Mortgage Corp., known as Freddie Mac, are nearing collapse. "Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission," Paulson said.

Fannie Mae share values dropped 33 percent Friday, while Freddie Mac's dropped 29 percent, The Wall Street Journal reported.

The lenders are both government-chartered, but the federal government is not legally bound to bailout them out, the Journal said. But, it is widely assumed the government would step in if necessary, analysts said.

"This situation with Fannie and Freddie is far more serious than Bear Stearns," Bill King, chief market strategist at M. Ramsey King Securities told the Journal.

Bear Steans' near collapse in March prompted a $29 billion government intervention.

Investors also worried a bailout would not prop up their holdings, the Journal reported.

Jon Najarian, of OptionMonster Holdings in Chicago, said he believed the two lenders would survive. "But their shares, in my opinion, are likely worthless."

Copyright 2008 by United Press International.