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Looking at my Fidelity MMF and Dodge Cox Balance funds I can't help but notice that they contain Freddie and Fannie Bonds. I get the part about they are guaranteed by Freddie and Fannie but not really by the US government. Can someone explain how might my funds be affected by the recent drop in Freddie and Fannie share price? Or put another way I know the Freddie and Fannie shareholders will take it on the chin but what about the holders of the bonds themselves such as Fidelity?

Yes, if Dodge owns Freddie and Fannie stock shares, the fund will sustain losses on those holdings to the extent Freddie and Fannie shares lose value.

As to the money market, you need to see if you can find out the holdings (this easy easy with Vanguard, if not up to date). Vanguard Prime MM had about 25% holdings in commercial paper (the rest was Treasury or government), and that was rated AA, for what that's worth (I take it to mean they owned Freddie and Fannie but not recognized sub-prime junk). So a rough guess would be a risk of up to 10% defaults on the commercial paper or 2.5% losses. Finding Fidelity holdings would allow you to make a similar guess.
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