US stocks fall on Fannie and Freddie fears

July 12th, 2008 - 8:09 am ICT by IANS  

New York, July 12 (DPA) Major US stock indices dropped Friday on continuing concern that mortgage giants Fannie Mae and Freddie Mac were threatened with possible collapse. US officials and politicians all sought to allay concerns Friday over the capital position of the two government-chartered companies, including President George W. Bush, who said his economic team “will be working this issue very hard”.

But officials were quiet on media reports of a possible government takeover should the two companies be unable to maintain operations. Fannie and Freddie guarantee about half of all US home loans.

The two firms’ shares were down as much as 50 percent in early trading but recovered somewhat during the day, after Treasury Secretary Henry Paulson said the Bush administration backed the lenders “in their current form” and made no mention of a takeover.

Fannie and Freddie still led a gauge of banking shares to their lowest level in 11 years amid continuing fallout from the US mortgage crisis.

The price of crude oil also reached another record high Friday, climbing $3.43 to $145.08 per barrel in New York trading and further depressing stocks.

The blue-chip Dow Jones Industrial Average dropped 128.48 points, or 1.14 percent, to 11,100.54. The broader Standard & Poor’s 500 Index was down 13.9 points, or 1.11 percent, to 1,239.49. The technology-heavy Nasdaq Composite Index fell 18.77 points, or 0.83 percent, to 2,239.08.

The dollar fell to 62.75 euro cents from 63.36 euro cents on Thursday and to 106.27 Japanese yen from 107.07 yen.

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