They both fell early in 2008 when it was quite clear
that there were problems in the subprime market.
And they owned a fair amount of subprime.
So at this point it was not just the lower rated tranches, but
rather even the AAA tranches that we knew would have a problem.
And this affected the stock price of Freddie and Fannie.
It rebounded somewhat in early 2008, around the time of the rescue
of Bear Stearns, and it wasn't until mid-2008,
May, that really it became clear that the business models that they had were
unsustainable without much more significant government support.
The stock prices dropped both to about $5 by mid July.
The new congressional legislation that came out in July,
that gave the treasury secretary some additional tools to help them,
helped the stock prices rebound a little bit.
But then you can see, by the time we reach early September,
around the time of the conservatorship, the stock price had fallen almost to zero.
It continues to be a puzzle today, years after the crisis,
exactly how Freddie Mac and Fannie Mae should be handled by the government.
But it's, in retrospect, quite clear that having government agencies
that had an implicit promise from the government, and the ability to go and
gamble with that implicit promise in their portfolios, is not a good combination.
And, in fact, they ended up taking on far more risk than they could sustain.