Fannie and Freddie shares head for the graveyard

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The government on Wednesday appeared to pull the plug on any remaining hopes that shares of Fannie Mae and Freddie Mac might be worth something.

Stocks of the busted mortgage-finance titans plunged after their regulator, the Federal Housing Finance Agency, said it directed the companies to delist their shares from the New York Stock Exchange.

That sparked furious selling, driving Fannie’s stock down 36 cents, or 39%, to 56 cents and Freddie’s down 47 cents, or 38%, to 75 cents.

Trading volume was huge: 349 million shares for Fannie and 215 million for Freddie. The stocks -- for decades two of Wall Street’s most popular financial issues -- are expected to move in early July to the over-the-counter Bulletin Board market, the electronic trading venue for stocks that no other market will accept.

In a statement, Federal Housing Finance Agency Acting Director Edward DeMarco said the decision “does not constitute any reflection on either enterprise’s current performance or future direction.” He said the move was based on expectations that there probably was nothing the companies could do to stay in compliance with NYSE listing rules, including minimum share price requirements.

But that’s another way of saying the stocks were headed lower, anyway.

“This action clearly confirms what we’ve known since September 2008 -- Fannie and Freddie are not real companies anymore,” Rep. Spencer Bachus of Alabama, the leading Republican on the House Financial Services Committee, said in a statement.

Since the government seized the companies in September 2008 -- and has poured more than $145 billion into them to keep them afloat amid surging home-loan losses -- many analysts have warned repeatedly that common shareholders would end up with nothing. The government now owns 80% of each company.

That hasn’t stopped speculators from having a ball with the stocks, abetted by the seal of legitimacy that an NYSE listing confers on shares. Last August, Fannie rocketed 233% and Freddie soared 269% amid a feeding frenzy by day traders, other momentum players and the ill-informed.

Oddly, the stocks also rallied briefly in late December after the Treasury on Christmas Eve announced that it was removing previously set limits on financial aid for the companies. The restrictions had capped aid at $200 billion for each firm.

But the stocks’ gains made no sense because any additional capital supplied by Uncle Sam would almost certainly come at the expense of shareholders’ remaining stake.

The Obama administration and Congress still must figure out what to do with the companies and their massive mortgage portfolios in the long run.

-- Tom Petruno