Global Financial Crisis: Freddie Mac monthly closing stock price 2000-2010

During the Global Financial Crisis of 2007-2008, a number of systemically important financial institutions in the United States declared bankruptcy, sought takeovers to prevent financial failure, or turned to the U.S. government for bailouts. Two of these institutions, Fannie Mae and Freddie Mac, were government-sponsored enterprises (GSEs), meaning that they were set up by the federal government in order to steer credit towards lower income homebuyers through interventions in the secondary mortgage market. While both were chartered by the government, they were also publicly traded companies, with a majority of shares owned by private investors.

The fall of Fannie Mae and Freddie Mac

These GSEs' business model was based on buying mortgages from their originators (banks, mortgage brokers, etc.) and then packaging groups of these mortgages together as mortgage-backed securities (MBS), before selling these on again to private investors. While this allowed the expansion of mortgage credit, meaning that many Americans were able to buy houses who would not have in other cases, this also contributed to the growing speculation in the housing market and related financial derivatives, such as MBS. The lowering of mortgage lending standards by originators in the early 2000s, as well as the need for GSEs to compete with their private sector rivals, meant that Fannie Mae and Freddie Mac became caught up in the financial mania associated with the early 2000s U.S. housing bubble. As their losses mounted due to the bursting of the bubble in 2007, both companies came under increasing financial stress, finally being brought into government conservatorship in September 2008. Fannie Mae and Freddie Mac were eventually unlisted from stock exchanges in 2010.