The eventual fates of mortgage giants Fannie Mae and Freddie Mac—along with Wall Street titan Lehman Brothers—could prove to be a watershed in the financial crisis and help restore confidence in the stock market, analysts say.
The immediate impact of a collapse of any of the firms would likely create panic selling on Wall Street, these analysts believe. Yet it also could help convince investors that the worst had finally passed for the battered banking and housing markets, helping to bring a recovery in stocks and the economy.
“One of the things that this market has been missing is a real panic,” says Mike Larson, market analyst at Weiss Research’s Money and Markets investment newsletter. “If we were to see an actual failure, a nationalization, some kind of take-under deal … if we were to see something like that and we were to get some panic in the short term, in the long term that would be helpful to clear out those sellers that are left.”
The uncertainty over what will happen to Fannie, Freddie and Lehman—and when—is probably the greatest factor roiling Wall Street and the stock market.
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