The latest story to hit the equity and housing markets is the serious situation now affecting the US traditional mortage lenders in the (this time...) Prime Loan Market. Both Fannie Mae (FNM) and Freddie Mac (FRE) are now considered to be insolvant, having continued to see their revenue situation deteriorate as the housing cycle in the US spiraled ever lower. They are the largest mortgage companies in the country.

Both issue government guaranteed loans, which means that both can be expected to call on the government for help in funding. The companies are quoted on the NYSE and their unlucky shareholders will be the first victims of the current situation.

What makes this worthy of note here is that the Government was already deeply mired down in the Bear Stearns failure earlier this year, when it took a lot of nearly worthess debt on its books to make it possible for the bank to be taken over. Salvaging FRE and FNM in turn could actually affect the credit worthiness of the already alarmingly indebted United States, causing people worldwide to flee US Government paper, or forcing the US to offer higher interest rates on its bonds in order to insure their purchase. The effects of this would be incalculable.

Yet allowing the two most respected mortgage companies in the United States to 'hit the wall' would also have enormous repercussions in the Real Estate markets at home and abroad.

The slide everywhere seems set to continue, and could even accelerate...