CHESSNOID

The stock market was up and down again throughout the day. Investors seem to worry whether the federal reserve is doing enought to battle the credit crunch and if the worse of it is over or just coming. Based on what I read, the worst of the housing crash is yet to come. I thought the federal reserve had a plan to combat all the fallout but now it looks like it is retreating after making some great comments that caused a 600 point surge in the DOW last week.

After the market closed, fannie mae announced it will cut its dividend and try to raise some money through a preferred stock offering. The stock dropped some more in after market trading hours. I expect this will spill over into tomorrow’s opening numbers. According to a Yahoo article:

The government-sponsored company said it was slicing its dividend to 35 cents a share, starting in the first quarter of next year, and issuing $7 billion in preferred stock this month to cushion against losses in lower-quality mortgages.

Fannie Mae, which finances or guarantees one of every five home loans in the United States, last month reported a third-quarter loss of $1.4 billion, while forecasting housing market woes through next year because of mounting home loan delinquencies.

The stock sale “will provide the company with additional capital to conservatively manage increased risk in the housing and credit markets, help meet its mission of providing affordability, liquidity and stability, and free up capital to pursue emerging growth opportunities,” Fannie Mae said in a statement.

The action follows similar moves recently by Freddie Mac, its smaller government-sponsored rival in the $11 trillion home-mortgage market, which posted a $2 billion loss in the third quarter.

The company said Tuesday it believes the continuing turmoil in the housing and credit markets and anticipated further declines in home prices to “negatively affect” its financial condition and results next year.

Fannie Mae shares, already down $1.07 or nearly 3 percent in trading Tuesday, dropped to $33.88, losing $1.30, or 3.7 percent in after-hours trading. The company made the announcement after the close of trading.