Federal regulators and officials at Fannie Mae and Freddie Mac reiterated Friday that the companies are adequately capitalized and that a government bailout is not imminent, but stockholders in the government-chartered, publicly traded companies were not entirely reassured.

Continuing a monthslong slide that intensified Monday, Fannie Mae shares fell 22 percent Friday and Freddie Mac was off more than 3 percent. Investors are worried losses at Fannie and Freddie could force the companies to issue more common stock to raise additional capital. If the companies are unable to raise capital and the government steps in to place the companies in a conservatorship, their shares would be worthless.

The New York Times today reported that the Bush administration is considering a plan to place one or both companies in conservatorship if their financial problems worsen — echoing similar media reports Thursday.

President Bush acknowledged meeting with Treasury Secretary Henry Paulson Friday, and spent "a fair amount of time discussing these institutions. He assured me that he and Ben Bernanke will be working this issue very hard."

Reuters reported today that Bernanke, the chairman of the Federal Reserve Board, had promised Freddie Mac Chairman Richard Syron that the government-sponsored entities would be allowed to borrow at the discount window — an option the Fed first made available to investment banks late last year, as the credit crunch that began in August showed no sign of abating. The Federal Reserve later issued a statement denying that it had discussed opening the discount window to Fannie and Freddie, Reuters reported in a follow-up story.

In a statement, Paulson said the Treasury Department’s "primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission," indicating that the government is not preparing to step in.

The Office of Federal Housing Enterprise Oversight (OFHEO), which oversees the safety and soundness of the mortgage financers, said Thursday that the companies hold capital "well in excess" of requirements set by OFHEO, which exceed statutory minimums set by Congress.

Fannie and Freddie have raised $20 billion in capital, including $7.4 billion raised by Fannie Mae in May, said OFHEO Director James Lockhart. The companies are using the capital "to continue to grow and to play a critical role in the mortgage markets, which we expect them to continue to do," Lockhart said. Freddie Mac is committed to raising an additional $5.5 billion, Lockhart said, "which they will do given appropriate market conditions. At a very difficult time in the market, (Fannie and Freddie) have the flexibility and sound operations needed to support their mission."

In a statement, Freddie Mac officials said they can free up $250 million in capital per month by simply not replacing the $10 billion per month runoff in the companies retained mortgage portfolio. In addition to the $2.5 billion to $3 billion that it would raise over the course of a year, the company could also raise capital by reducing its $650 million annual stock dividend.

"We believe current speculation in the media around the issue of conservatorship does not accurately reflect the facts," the statement said. "Freddie Mac is not on the threshold of conservatorship because we are adequately capitalized. The preliminary indications of our expected financial performance for the second quarter, while reflecting the challenges that face the industry, do not point to an immediate need to raise additional capital."

Fortune magazine, citing mortgage analysts, said Fannie and Freddie have their financing needs covered through the end of next year, and that "concerns of an immediate collapse seem overwrought."


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