U.S. watching Macs' preferred shareholders

WASHINGTON, Aug. 23 (UPI) -- U.S. Treasury officials are watching Fannie Mae and Freddie Mac's preferred shareholders -- which include many banks -- for signs of panic, sources say.

Citing sources close to the department, The Washington Post said Saturday that Treasury Secretary Henry Paulson is looking to avoid wider financial turmoil by making moves that would prompt the preferred shareholders of the troubled mortgage finance companies to sell their shares.

Paulson is said to be keeping a close watch for any sign of panic among those institutional shareholders as he decides whether to inject government money into the two companies, the Post said.

The value of the shares, estimated to be worth $36 billion, has fallen recently, with Fannie's dropping 26 percent and Freddie's falling 36 percent in the last week.

Analysts say the situation may reach a moment of truth in early September when the two Macs will seek to refinance about $225 billion in mostly short-term loans that are coming due. Any sign of a sell-off by the preferred shareholders will likely persuade Paulson to act to inject the government funds, the newspaper reported.