Insolvency concerns have driven the share prices for the once venerable firms of Freddie Mac and Fannie Mae almost into the ground. Today, share prices for these two have fallen substantially. Freddie Mac's 52 week high is $67.20 and it closed yesterday at $8.00 and today's low share price (as of noon CST) was $3.90 although it has crept "up" to the $5 to 6 dollar range. The fear is that the Federal government might have to put these companies into a conservatorship based on a law set up in 1992. This "credit crunch" or "bumpy period" as some have called it is not limited to the mortgage business and is far from over.

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The two firms, which have no explicit government backing despite their government charter, provide liquidity to the housing market by buying mortgages and repackaging them into securities sold to investors. But the horrific housing slump has led to billions of dollars in losses for the firms.

Freddie Mac has a loan portfolio of 1.5 trillion dollars and Fannie Mae's is over 700 billion. Together they own or guarantee some 5.2 trillion dollars in loans, or about 40 percent of the total value of home loans in the United States.

The prospect of insolvency for the so-called government-sponsored entities or GSEs could send more shockwaves through the global financial system because of the size of the companies, and the notion of a bailout has prompted heated debate.

"The markets are concerned that these GSEs would default on their five trillion dollars of debt," said Andrew Busch at BMO Capital Markets.

Michael

Michael Vick, the former Atlanta Falcons quarterback, is serving a 23-month prison sentence after pleading guilty to federal dogfighting charges last year. “He was subsequently suspended indefinitely without pay and lost all his major sponsors, including Nike.” Vick filed for Chapter 11 bankruptcy Monday in the Eastern District of Virginia. The debt includes part of a signing bonus that the Falcons are seeking to recover.

According to the bankruptcy filing, “Vick cites debts of $10 million to $50 million and a comparable amount of assets.” The Falcons tried to recover about $20 million in bonuses Vick earned from 2004 to 2007. But a federal judge held that “Vick is entitled to keep $16 million and must return $3.75 million of the money paid to him for playing football through the 2014 season.”

Other creditors with claims against Vick include Wachovia Bank and the Royal Bank of Canada. “A federal district court in Atlanta ruled that Vick must repay $1.1 million to Wachovia for defaulting on a loan to open a liquor store and restaurant.” “That decision came less than a week after a judge ruled that Vick must repay the Royal Bank of Canada $2.4 million for defaulting on yet another loan.”

Here is a link to the article:
http://biz.yahoo.com/law/080710/548d6774bfa2b01a74252644467a189a.html?.v=1

Another link on the subject:
http://www.usatoday.com/sports/football/nfl/2008-07-08-vick-bankruptcy_N.htm?csp=34

Yameena