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Investors fear bailout of Fannie, Freddie

Regulators say companies are adequately capitalized

Shares of Fannie Mae and Freddie Mac hit 17-year lows today as investors' fears about the companies' ability to raise additional capital fueled speculation of the possibility of a government bailout. The government-chartered companies -- which purchase mortgages and securitize and sell pools of loans to investors with guarantees on their performance -- are adequately capitalized, federal officials insist. But some investors are worried that their shares in the publicly traded companies will be diluted if losses at Fannie and Freddie force the companies to issue more common stock to raise additional capital. Investors could face even more substantial losses if the companies are unable to raise capital and the government steps in to provide assistance. On Monday, a Lehman Brothers report stoked fears that Fannie and Freddie would be forced to raise about $75 billion in additional capital because of proposed changes to an accounting rule by the Financial Accounting Standar...

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