NAKED SHORT SELLINGOverviewThe declining values in Fannie Ma

NAKED SHORT SELLINGOverviewThe declining values in Fannie Mae and Freddie Mac stocks in 2007–2008 were the result of risky mortgages and foreclo-sures. This led to a surplus of declining real property values in the United States and a significantly negative impact on equity prices and financial markets in the United States and around the world. It’s likely that this topic will be studied for many years, as Alan Greenspan, former Federal Reserve Chairman, has referred to it as a once-in-a-century “financial tsunami.”On the following page are graphic representations of the stock price per share for Fannie Mae (FNM) (Figure 1) and Freddie Mac (FRE) (Figure 2), the holders of approximately 50 percent of the mortgages in the United States.InstructionsRead the boxed article, “Reinflating Real Property Values,” by A. J. Cataldo and Anthony P. Curatola, from Strategic Finance, October 2008. Then respond to the questions that follow. Feel free to use Google, Wikipedia, or any other reliable Internet sources for your research. Be sure to verify your answers by checking multiple sources.