Shareholders in battered housing finance giants Fannie Mae (FNM) and Freddie Mac (FRE) resumed their punishment of the government-sponsored entities early Tuesday morning, as credit fears kept their grip on much of the financial sector ahead of highly-anticipated testimony from Fed chief Ben Bernanke. Freddie was last seen being sold off 20 percent from yesterday’s already depressed close in pre-market trading — shares were at $5.73, down $1.38. Fannie was at $7.99, down 17.9 percent. Any mortgage market participant should be stunned to read these numbers; the concern among equity holders appears not to be solvency, but that their interests will be serially diluted by direct government intervention to purchase an as-of-yet undetermined equity position in one or both companies. On Sunday, both the Treasury and the Federal Reserve released plans to backstop the ailing giants by providing access to the Fed’s discount window, as well as asking Congress to expand a credit line from the Treasury and seeking the authority to buy up equity in either company should market conditions warrant it. The message that the government would backstop the ailing housing giants left stock investors see-sawing Monday on what the government strategy would really mean for share in the battered mortgage industry giants. In particular, investors zeroed in on the potential for the Treasury to step in an buy shares of either Fannie or Freddie should market conditions warrant. So far, no clarification of the government’s proposed strategy has been made known; in particular, how much authority the Treasury is seeking in its efforts to gain access to either GSE’s equity capital. The Wall Street Journal suggested in a wide-ranging story on the Treasury’s evolving response to the housing crisis that the lack of definition may reflect lawmakers and regulator’s own uncertainty over the details of a plan that was hatched in a matter of weeks. Disclosure: The author was long FRE and held no other positions of relevance when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.