NEW YORK (AP) – Wall Street extended its slump into yet another week Monday as investors worried that even a safety net set up for mortgage financiers Fannie Mae and Freddie Mac wont’ head off further troubles in the financial markets.

Investors’ latest unease about the banking sector comes in a week when many financial names are to issue quarterly reports – many of which will likely include sizable write-downs of souring mortgage debt.

The Treasury and the Federal Reserve said Sunday they would aid Fannie Mae and Freddie Mac if needed. Wall Street has been on edge about the well-being of the government-chartered companies because they together hold or back $5.3 trillion of mortgage debt, about half the outstanding mortgages in the United States. Washington’s efforts to shore up confidence in Fannie Mae and Freddie Mac at times helped those shares Monday but troubles arose in other corners of the financial sector.

Investors worried about a run on IndyMac Bancorp Inc. that led to the bank’s takeover by the government Friday. IndyMac is the largest regulated thrift to fail.

Trading in shares of regional bank National City Corp. was briefly halted as the company responded to rumors of financial troubles. The bank said in a statement it is experiencing “no unusual depositor or creditor activity” and that as of Friday’s close it had more than $12 billion of excess short-term liquidity.

The rumors and sell-off of regional banks reflect the unease investors have about where financial troubles might emerge.

“My sense is that investors are taking a pretty cautious stance,” said Jack A. Ablin, chief investment officer at Harris Private Bank in Chicago. “The government can’t bail out the whole industry.”

“There’s a disconnect with saving Fannie and Freddie and bailing out the shareholders,” Ablin said. “If the government steps in and ultimately creates a bailout of these entities, I’d be astounded if equity holders were left with anything. I think the market is realizing that.”

Jeff Kleintop, chief market strategist at LPL Financial Services in Boston, said investors are pouncing on banks in regions where the housing market pullback has been the steepest, thinking they are likely to have the greatest exposure to bad mortgage debt.

“We might not be seeing depositors make a run on the banks today but we’re certainly seeing investors do that,” he said.


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