Market Takes a Dive, Again

The market is tumbling again on very little hard news.  Fannie Mae and Freddie Mac are down 43% and 49% respectively on rumors of an imminent government bailout which would essentially wipe out shareholders.  Treasury Secretary Hank Paulson will be speaking at some point today to address concerns about Fannie and Freddie.  Frankly, I'm not sure how much this is going to help the financials.  I must express my surprise again that Fannie and Freddie are going to zero before the other broker dealers, given how much investment banks depend on Fannie and Freddie for business.  But the market is always full of surprises.  For example, why did everyone decide this week that Fannie and Freddie were basically insolvent?  Everyone already knew how leveraged they were and that they would need to raise capital to withstand further write-downs from the deterioration in their mortgage holdings.  But somehow, this week, people threw up their hands, decided enough was enough, and started blasting their holdings.  I would actually believe this was capitulation, except that when you're talking about highly leveraged players, capitulation isn't over until the stocks trade at zero.