The Day After

The jitters over Monday’s stock market meltdown of Fannie Mae and Freddie Mac shares haven’t disappeared, but there are some second thoughts today. First, the two government-sponsored entities rallied on Wall Street after a regulator pronounced this morning that they have enough capital on hand. And Housing Wire weighed in with some criticism of Lehman Brothers over its warning that Fannie Mae and Freddie Mac needed to raise some $75 billion in capital or they’d be in big trouble. That warning prompted the investor hysteria. Specifically, Housing Wire questioned whether the warning was correct:

Some of HW’s sources on Monday accused Lehman of “factless fear stoking” in discussing the analysis in the report.

“Given the scrutiny the markets are under, Fannie and Freddie in particular, it’s irresponsible to put something like this out without having clearly done your homework,” said one source, a bank executive that asked not to be named.

Naked Capitalism, on the other hand, takes a closer look at the other grim story of the day, the continuing implosion of mortgage lender IndyMac. The lender halted all new mortgage lending and said it can’t raise needed capital. IndyMac also can only sell off its assets at a loss, and Naked Capitalism cites a knowledgeable reader’s comment that should serve to only stoke more jitters: Regulators can’t find a buyer for IndyMac, so they are shrinking it before taking it over. That way, regulators can "kick these problems over to the new administration."

 Let’s see what the rest of today has yet to bring.