WASHINGTON (AP) -- Shares of mortgage finance companies Fannie Mae and Freddie Mac continued their plunge Wednesday as investors became increasingly convinced that the stocks will drop to zero if the government bails out the troubled companies.
Fannie Mae's chief executive sought to reassure investors that no bailout is imminent.
"They haven't offered anything and we haven't asked for anything," Fannie Mae CEO Daniel Mudd said in a public radio interview Wednesday morning. "I don't anticipate that they will do that."
Mudd said the company's financial position "remains very strong," and that he intends to remain Fannie's CEO.
Executives with McLean, Va.-based Freddie Mac met with Treasury department officials on Wednesday morning, according to two sources familiar with the meeting who were not authorized to discuss its contents publicly. They described it as part of a regular series of meetings that have been occurring since last month when the Bush administration announced a plan to aid the two companies.
The two government-sponsored companies, the largest source of funding for home mortgages in the U.S., have struggled with soaring losses from mortgage defaults. Washington-based Fannie Mae and Freddie Mac have lost a combined $3.1 billion between April and June, and investors fear the losses will continue to grow.
Shares in the mortgage finance giants tumbled Wednesday to the lowest levels in nearly two decades. Fannie Mae stock fell 98 cents, or 16.3 percent, to $5.03 in afternoon trading after earlier hitting a low of $4.74. Shares of Freddie Mac fell 74 cents, or 17.8 percent, to $3.43 after earlier hitting a low of $2.95.
Both companies' stocks are down about 90 percent so far this year.
"They don't have insight on how bad losses are going to get," Friedman, Billings, Ramsey & Co. analyst Paul Miller said in an interview Tuesday.
The Bush administration on July 13 unveiled a plan to provide unlimited government loans to the two mortgage giants and to purchase stock in the two companies if needed for a period covering the next 18 months. Congress ultimately adopted those proposals as part of a broader bill that also seeks to help keep 400,000 households from losing their homes to foreclosure.
Critics charged that the open-ended nature of the support for Fannie and Freddie would expose taxpayers to billions of dollars of potential losses.
Treasury Secretary Henry Paulson has insisted that the package needed to be structured in this way to boost financial markets' confidence as the companies deal with mounting losses from mortgages that have gone bad.
But investors have grown worried in recent days, following a Barron's magazine article citing an anonymous Bush administration source, reported that the government is pressing the companies to raise more money to guard against losses but doesn't expect them to succeed.
The Barron's report said the government is likely to buy preferred stock in the companies, wiping out common shareholders. Paulson has declined to comment on whether a rescue is imminent.
AP Business Writer Martin Crutsinger contributed to this report.
