Embattled mortgage backer, Fannie Mae, revealed on Tuesday that it had received notification from the New York Stock Exchange (NYSE) that its shares currently fail to fulfill price-related requirements for listing on the exchange. One of the NYSE requirements for continued listing is that the average closing price of a stock remains above $1 per share. Fannie Mae stock was trading at levels as high as $40.45 around a year ago, but on Tuesday closed at 47 cents, underscoring just how dire the once mighty mortgage backer’s circumstances have become.
Fannie Mae’s response to the notification is that it is working with the Federal Housing Finance Agency, which is acting as conservator to investigate ways of boosting the share price, but had as yet not reached any conclusions. If Fannie Mae has good reason to believe the share price can be boosted and notifies the NYSE accordingly, it will have six months from the date of the notification, being 12 November, to raise the stock above $1 and keep it there for 30 consecutive trading days in order to remain listed. Fannie Mae has approximately 1.08 billion shares outstanding. Last week it posted a $29 billion third quarter loss and advised that the $100 billion lifeline extended by the government may not be enough to keep the company solvent should it continue to lose money.
Meanwhile, lawmakers have challenged the manner in which Treasury Secretary Henry Paulson has to date handled the $700 billion bank bailout program. They are emphasizing the importance of doing more to assist individual homeowners. Together with Federal Deposit Insurance Corporation Chairman Sheila Bair and Federal Reserve Chairman Ben Bernanke, Paulson responded to the members of the House of Representatives by assuring them that his agency had handled the situation appropriately in what has been an extremely fast changing and painful crisis that impacted on the entire global financial system. Paulson is quoted as telling members of Congress: “When the facts changed and the circumstances changed, we changed the strategy. We didn’t implement a flawed strategy. We implemented a strategy that worked.”
Many lawmakers are frustrated that the Troubled Asset Relief Program (TARP) appears to have been abandoned, despite the fact that when Paulson and Bernanke presented the bailout plan to lawmakers in September, they were insistent that the government should rid banks of troubled assets on their balance sheets. Now the focus has changed from buying up troubled mortgage assets to taking ownership stakes in the struggling financial institutions, with a view to thawing frozen credit markets and thereby get banks lending again. However, with the credit markets remaining largely frozen, it appears that banks may be hoarding the money or even putting it towards other uses, such as buying out weaker rivals.
Paulson revealed last week that the Fed and the Treasury may assist consumer finance companies in order to free up credit to consumers for auto loans, credit cards and student loans. However, lawmakers still believe that more should be done to stem the tide of foreclosures and help homeowners to hold onto their homes. (See Article: New Mortgage-Related Assistance May Bring Relief to U.S. Homeowners).
