Fannie Mae and Freddie Mac, the nation’s largest mortgage financial institutions, are experiencing a significant drop in its shares as well as decreasing confidence levels.

Just recently, Fannie dropped 28 percent while Freddie fell 26 percent, totaling to an 80 percent loss in value since the beginning of 2008.

Last Sunday, the government asked the Congress to grant officials the power to infuse billions of dollars to the mortgage giants through a “sweeping rescue package.” The move would require purchase of the companies’ stocks using public money.

Despite claims by the chief executives of the two companies that they have enough capital reserves, they expressed appreciation for the support being given by the government.

“Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market,” says Daniel H. Mudd, Fannie Mae president and CEO.

Both companies play a crucial role in the mortgage system, that failure would tremendously affect the housing market.

Fannie and Freddie are considered as government-sponsored enterprises (GSE’s) that own or guarantee half of the country’s mortgages. Failure by both can also affect financial institutions around the world because debt securities used to finance the companies’ operations are owned by foreign governments, pension and mutual funds, large companies and other big investors.

Treasury Secretary Henry M. Paulson Jr. announced on Sunday the administration’s plan to work out a plan to rescue the mortgage giants with the help of Congress.

“Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction,” he stated in his announcement.

The following are the measures considered in the rescue plan:

• Federal Reserve would allow Freddie Mac and Fannie Mae to borrow money at a special rate from one of its short-term lending programs to make home mortgage credit available.

• Treasury’s proposal to extend Fannie Mae and Freddie Mac’s line of credit to $300 billion.

• A call for Congress to raise the national debt limit and give the Federal Reserve a consulting role in determining the amount of capital cushion each company must have.

• Allowing Freddie and Fannie to secure liquidity from the Federal Reserve if necessary.

• As a further action, the Treasury is also considering to seek ‘temporary’                 authority to directly buy equity in the GSE’s to make sure that both companies will avoid experiencing liquidity problems.

The plan drew out support from some senators like Christopher Dodd, D-Conn., and Charles Schumer, D-N.Y. However, it also drew opposition from others both in the Democratic and Republican parties.

Dodd and Paulson are hoping that the measure will be added to a broader housing reform bill.