There’s some smoke coming from Fannie Mae and Freddie Mac, says Chuck Butler. Fannie and Freddie were rumored to announce bailouts yesterday. These never materialized. There’s smoke but is there fire?

Fannie Mae (FNM:US) plunged 16 percent to $15.74, the lowest price since July 1992. The company and Freddie Mac (FRE:US), the biggest sources of financing for U.S. mortgages, slumped as concern grew that they may need to raise more capital to overcome write downs and satisfy new accounting rules. Freddie Mac declined 18 percent to $11.91, the lowest since November 1993.

Fannie and Freddie were rumored to announce bailouts yesterday afternoon… That didn’t happen, but the markets are smelling blood in the water. The markets now feel as though these two will need approx. $75 Billion in new Capital to remain viable Companies…

Could these two be the next “risk events” that I keep talking about in the U.S.? It’s all rumors and hearsay now.. But like the song goes… There’s no smoke without a fire…. There’s no heat without a flame…

Or… Could it be the news from Indy Mac, who agreed with regulators to halt new loans under an agreement with the regulators, and then announced that they would cut half its staff as mortgage losses mount? Again, folks, I’m not picking on these companies because I have some vendetta against them… I’m just reporting what’s on the news wires, as something that could affect the value of the dollar in the long run.

Source: Where There’s Smoke…