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Odds are the answer is yes. As share prices plummeted after a Barron’s article yesterday for both Fannie Mae (down 22%) and Freddie Mac (25%) the companies are in a very precarious spot. The Wall Street Journal has an editorial discussing this today that is spot on.

The main call to action in the editorial is for a complete house cleaning of the management that has created this situation. There has way to much featherbedding to maximize bonuses in these quasi political entities for the good of anyone. A new team that is focused on fulfilling the role of the funds is in the best interests of all.

Both companies insist they have adequate capital to ride this out, but they also said this before Treasury and Congress felt obliged to make explicit what had been an implicit taxpayer guarantee. Freddie still says it will raise another $5.5 billion from investors, and good luck with that. Freddie has a negative corporate net worth and a market capitalization — after Monday’s losses — below $3 billion. Freddie holders, who have lost more than 90% of their investment in the last 12 months, may not want to double down.

Meantime, Treasury claims it has no plans to inject taxpayer money directly into the companies. Even so, Mr. Paulson has quietly hired Morgan Stanley, the investment bank, to look into “appropriate capital structures” if he does decide to sign the blank check that Congress has given him. via WSJ.com

Related posts:

1. Freddie Mac and Fannie Mae Trim Reserves To Revitilize the Market
2. Fannie Mae and Freddie Mac Face Market Turmoil
3. Are Fannie Mae and Freddie Mac A Danger To US Economy?
4. Criminal Probe of Fannie Mae and Freddie Mac???
5. Congress Decides Taking Money From Freddie Mac and Fannie Mae For Housing Fund