Mortgage lenders Fannie Mae and Freddie Mac are "insolvent" and may need a U.S. government bailout, former St. Louis Federal Reserve President William Poole was quoted as saying in an interview with Bloomberg.

"Congress ought to recognize that these firms are insolvent, that it is allowing these firms to continue to exist as bastions of privilege, financed by the taxpayer," Poole was quoted as saying in an interview held on Wednesday.

Chances are increasing that the government may need to bail out the two mortgage companies, Poole was quoted as saying.

Shares of the two companies have taken a beating recently on worries about whether they can withstand more losses and support housing as well as concerns that they may need to raise massive amounts of new capital.

Freddie Mac shares tumbled 23.8 percent to $10.26 on the New York Stock Exchange on Wednesday, while Fannie Mae shares sank 13.1 percent to $15.31.

Poole could not be immediately reached for comment.

The Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter, according to reports in The Wall Street Journal.

(Reuters)