Page last updated at 20:38 GMT, Wednesday, 20 August 2008 21:38 UK

Fannie Mae and Freddie Mac slump

Home repossessed in US

Shares in US mortgage finance giants Freddie Mac and Fannie Mae have plunged to their lowest levels in nearly two decades.

The fall has reignited speculation that the US government will be forced to bail out the pair.

Shares in Fannie Mae, the biggest US provider of housing finance, fell 27% to $4.40, the lowest since 1988.

And shares in counterpart Freddie Mac crashed by nearly 22% to $3.25, their lowest since 1990.

However, the Treasury has said that it has no plans bail out the two firms, which underpin the US mortgage market.

The pair are government-sponsored enterprises and own or back almost half all US mortgages.

The Treasury gained the authority to bail out the Freddie Mac and Fannie Mae, including buying shares in the two companies if needed, in a rescue plan approved at the end of July.

On Monday a report by US financial weekly Barron's suggested that the chances of a government rescue were increasing.

The paper said a government bail-out would likely wipe out existing holders of the firms' shares.

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