WASHINGTON — Federal regulators are expected to extend through mid-August a temporary order banning a certain kind of short-selling of the stocks of mortgage-finance companies Fannie Mae and Freddie Mac and 17 large investment banks.
Advocates for smaller banks and investment firms also have been urging the Securities and Exchange Commission to expand the order — scheduled to expire today — to cover additional financial companies. They contend that smaller companies continue to be targeted by so-called naked short-selling. But such action will require a formal proposed rule to be voted on by the SEC commissioners.
SEC Chairman Christopher Cox told Congress last week that a proposal expanding the order to cover all public companies will be introduced soon. An agency spokesman declined to comment Monday.
The SEC announced the emergency order July 15 after a perilous slide in shares of Fannie and Freddie, the government-sponsored companies that together hold or guarantee more than $5 trillion in home mortgages — nearly half the U.S. total.
The SEC move followed a 13 percent drop in the price of Fannie shares and a 22 percent plunge in Freddie’s on July 10, when a news report said the government had begun contingency planning in the event the companies failed. The next day, Freddie shares plummeted 33 percent at one point and Fannie stock lost 29 percent.
The SEC has said the order could be extended for up to 30 calendar days if the agency determines that is necessary for the public interest and to protect investors.
