Another Day, Another Plunge in Fannie and Freddie Shares

Shares of Fannie Mae and Freddie Mac are down on the day again, as investors continue to race for the exits.  Rampant speculation continues about the future of the mortgage giants, with many calling for a nationalization of the two firms.  Remarkably, the Treasury Department has been mum about the matter, claiming that it has no immediate plans to intervene in the two firms activities.  I am not terribly surprised by the plunge in Fannie and Freddie's stocks (or their preferred and sub debt.)  However, I find the widening of spreads on Fannie and Freddie's senior debt to be a real head scratcher.  Spreads on Fannie and Freddie's senior debt are wider than they were before Hank Paulson announced that the government would inject unlimited funds into the GSE's.  If the government is supporting  these two firms financially, then owning Fannie and Freddie's debt should be the same as owning US Treasuries.  If anything, Treasuries should get pummeled because the potential debt burden on the US government has increased by a couple of trillion dollars.  Yet somehow, Treasuries are still being viewed as a "safe haven" while Fannie and Freddie's debt is looking more like toxic waste.  Those with good insight about this situation are welcome to comment.  For interesting commentary on the precarious situation the Treasury faces with the GSE's, Naked Capitalism has a great summary that is worth reading.