WASHINGTON — Shares of Fannie Mae and Freddie Mac soared Monday after Freddie completed a $2 billion debt sale and a Wall Street analyst said a government bailout of the mortgage finance giants may not be inevitable.
But a few regional banks with significant holdings in Fannie and Freddie preferred stocks followed the rest of the market down amid questions over whether federal regulators would step in to rescue the two government-sponsored companies.
Gaining a respite from their battering in recent days, shares of Fannie climbed as much as 95 cents before dropping back to close at $5.19, up 19 cents. Freddie jumped 48 cents, or 17 percent, to close at $3.29.
Citigroup analyst Bradley Ball said that federal bailouts “don’t necessarily wipe out all” company shareholders and that Fannie and Freddie still have options despite their steep stock decline in recent weeks.
“We are not convinced that (the government) needs to take any action over the near term,” Ball wrote.
But Len Blum, managing director and partner at investment bank Westwood Capital in New York, said Monday’s rebound is likely to be temporary, as the companies’ ability to raise capital on their own appears uncertain.
Freddie’s sale of $2 billion in short-term debt was well received on Wall Street, but the company had to sweeten terms of the offer to lure demand, investors said.
Meanwhile, JPMorgan Chase disclosed Monday that it held about $1.2 billion of Fannie and Freddie preferred shares. It estimated the shares have lost about $600 million since the start of the quarter on July 1, based on their current market values.
