NEW YORK (AP) - Wall Street sank further into a bear market Friday, as investors dumped stocks on troubles at mortgage companies Fannie Mae and Freddie Mac and oil's continuing climb into record territory. The Dow Jones industrials slid below the 11,000 mark for the first time in two years before paring their losses.
Investors appeared unimpressed by a statement from Treasury Secretary Henry Paulson, who said the government's focus is ensuring that Fannie Mae and Freddie Mac keep operating in their current form—countering reports that the government was contemplating plans to take over one or both of the companies.
The government-chartered companies have fallen sharply in recent days on concerns about their stability. Wall Street is worried that a collapse of the two financiers would cause further shock to the financial system, and trigger more losses to banks and brokerages with significant holdings of mortgage-backed securities.
The well-being of Fannie Mae and Freddie Mac is crucial because they hold or guarantee about $5 trillion worth of mortgages. Their troubles are just the latest depressing turn in a year-old credit crisis that shows no sign of ending, disappointing some stock traders who thought just months ago that the worst was perhaps over.
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