The possibility of a bailout of U.S. mortgage financiers Fannie Mae and Freddie Mac is shaking world financial markets, warns economic research firm Global Insight Inc.

Freddie shares were down nearly 33% to US$5.40 early Friday afternoon, while Fannie plunged more than 29% to US$9.31. Both are trading at levels not seen in nearly two decades.

In a research note released Friday, Global Insight notes that shares in the two government-backed mortgage giants at the centre of the U.S. housing market, “have plummeted as investors doubt the authorities’ reassurances that the firms remain well capitalised”.

“The two institutions’ problems stem from the collapse of the value of home loans they hold and rising obligations in meeting debt guarantees,” it explains. “They need to raise capital to make up for this, but such capital can be hard to find even for them.”

Global Insight points out that these fears have been triggered by rumours rather than hard data, compounded by rumours about Wall Street brokerage house Lehman Brothers’ financial health.

“It should be stressed that there has been no firm news this week to justify the panic surrounding Freddie Mac and Fannie Mae. They have long been under some strain, but no new data have emerged to show that their situation is deteriorating. The rumour mill seems to have been started by an analyst’s report on Monday, and then gained a momentum of its own,” the firm says. Yet, the negative sentiment in itself hurts the two firms, and will potentially complicate their efforts to raise funds, it says.

The best-case scenario is that the institutions can ride out this turmoil, and find fresh capital, Global Insight says. A middle scenario is that they will need to turn to the government for some form of help, as it notes they are surely “too big to fail”. The worst-case scenario is that the government can’t prop them up, and they effectively go into default, at which point the government would presumably be forced to take them over, leaving taxpayers with the bill.

“If some of the rumours flying around prove true, we could be heading for one of the worse scenarios. The current credit crunch has broken so many ‘rules’ and set so many precedents, that no-one is ruling out anything,” it concludes. “The presence of [US Treasury Secretary Henry] Paulson and [Federal Reserve Board chairman Ben] Bernanke at the helm should offer some reassurance, nonetheless. They have made some good calls at key moments, and their attention is sure to be focused squarely on Freddie Mac, Fannie Mae, and Lehman Brothers this week.”

This morning Paulson issued a statement on the situation, saying,”Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission.”

“We appreciate Congress’ important efforts to complete legislation that will help promote confidence in these companies. We are maintaining a dialogue with regulators and with the companies,” he added.