Investors Losing Confidence

[dollardaze]

Today stock prices of mortgage giants Fannie Mae and Freddie Mac rose only slightly after their steep decline last week. Midday saw investors turn to a new target - banks. The stocks of several banks saw a big decline, with the trading at one of them temporarily being halted as the company was quick to issue a statement addressing 'market rumors', saying it had not experienced any 'unusual depositor or creditor activity'.

Investors are losing confidence in parts of the banking industry, as the credit crisis continues to spread. This includes some of the smaller banks that have overextended themselves into commercial loans.

Some of the large banks are also continuing to feel the unease in Wall Street, with shares of some dropping more than 30% over the lunch hour on the New York Stock Exhange and down more than 15% by mid-afternoon after trading resumed. Shares at another one fell 33%.

Customers of IndyMac Bancorp, Inc. had withdrawals of over $1.3 million over 11 business days, and as a result on Friday, the Federal Deposit Insurance Corp, took over, at an estimated cost of between $4 billion and $8 billion.

Investors initially pushed Fannie's stock price up more than 20%, with Freddie Mac adding more than 15% in early trading, as Wall Street took stock of a government plan to support those two giants. Those gains however were short lasting however, which indicates that the government action had not restored confidence that Freddie and Fannie can rise above the current falling real estate and mortgage markets.