Grim Reaper stalks Fannie and Freddie

The stock market appears to be on deathwatch.

Fannie Mae and Freddie Mac shares fell again on Friday — and the broader stock market followed suit — as concern mounted that the government will be forced to take over the beleaguered mortgage finance companies, which some investors fear are at risk of default.

Less than an hour after the markets opened, Henry Paulson, the Treasury secretary, said a government bailout was not an immediate possibility.

"Our primary focus is supporting Fannie Mae and Freddie Mac in their current form," Paulson said in a statement. "We are maintaining a dialogue with regulators and with the companies."

The companies currently operate with an implicit, but not assured, government guarantee.

The remarks did not appear to placate investors, who accelerated the sell-off that began at the market's open. Investors were running scared across the board, sending the Dow Jones industrial average down 244 points and the Standard & Poor's 500-stock index down 2.2 percent in midday trading. ...

Freddie Mac stock has lost nearly 70 percent of its value in the last week alone. Fannie Mae shares have fallen 55 percent during that period. Both companies' shares are trading at their lowest levels in nearly two decades.