Fannie and Freddie Shares Plunge

Shares in Fannie Mae and Freddie Mac experienced their sharpest drop in 16 years on Monday amid fears the government backed enterprises may be forced to raise as much as $75 billion in additional capital.

Despite Fannie Mae falling 20 percent and Freddie Mac plunging 26 percent, the fall has been attributed largely to an analyst with Lehman Brothers wrote in a report that he believed the two companies may be forced to raise substantial capital if accounting rules were changed.

Bruce Harting, the Lehman Brothers analyst said, "It's in no one's interest for the GSEs to be saddled with overwhelming capital requirements at a time when the market needs them to buy mortgages."

Both Fannie Mae and Freddie Mac help mortgage market function by buying pools of loans and packaging them into securities, but mortgage market deterioration continues to hit their portfolios.

The decline in Fannie Mae and Freddie Mac comes at a delicate time for the financial markets, with both Citigroup and Merrill Lynch threatening to report disappointing results. Both Fannie Mae and Freddie Mac have so far declined to comment on their stocks' performance.