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Oil prices soar, Freddie and Fannie stocks drop

by Tracie Potts/NBC News
Friday, July 11, 2008

WASHINGTON, D.C. -- The economy took a one-two punch Friday: Oil hit a new record, and stocks for Freddie Mac and Fannie Mae tanked further, amid fears the housing giants could run out of money.

Freddie Mac and Fannie Mae hold or guarantee half of the almost $10 trillion of debt in this country.

Washington's afraid that foreclosures could drive one, or both, of them out of business. The Senate's banking chair insists they are solid.

"These are sound, solid institutions with more capital than the law would require," said Sen. Christopher Dodd. "They're in good shape."

"There's no reason to even be talking about failure here," he added.

What's oil got to do with Freddie Mac and Fannie Mae?

"It's going to be very difficult if the government moves in to bail them out," said Addison Armstrong with Tradition Energy. "It's going to put a lot of pressure on the bond market and the dollar, which in turn is going to keep oil at a very high level."

Oil hit another record today -- $147 a barrel.

Pres. George W. Bush met with his economic team and urged Congress to do something before their August break.

"They have a responsibility to explain to their constituents why we should not be drilling for more oil here in America to take the pressure off of gasoline prices," Bush said.

Experts agree -- high gas prices are mostly about supply and demand. But some in congress blame speculators and introduced legislation today to rein them in.

"This is a factor we can do something about," Sen. Susan Collins, R-Maine.

Industry groups -- from truckers and pilots to gas station owners -- agree. Gas is so high now, even the winner of Florida's lifetime gas lottery, with a $39,000 check in hand, was skeptical.

"This'll last me for a day or two," said Florida lottery winner Bobby Harron.

But there was a bit of good economic news Friday from the Commerce Department: The U.S. trade deficit narrowed a bit. It appears exports are at an all-time high.