By Katie Benner

Should Fannie Mae (FNM) and Freddie Mac (FRE) run into serious problems, a rescue plan would likely shaft shareholders, the Wall Street Journal reports. Citing people familiar with the matter, the Journal says Treasury Secretary Henry Paulson is adamant that no government bailout plan benefit shareholders. The Bush administration says it thinks the firms will not fail and that its plan is to support Fannie and Freddie in their current forms.

Talk of a rescue heated up this week after a Lehman report Monday said that the companies may need to raise a combined total of $75 billion due to a possible Financial Accounting Standards Board (FASB) rule change that would force the mortgage giants to move securities they now hold onto their balance sheets. Fannie shares plunged 16% and Freddie shares 18% Monday, even though the analyst note said that the companies were both solvent and would probably not be affected by a change in accounting rules.

Even so, investors continued to flee the stocks all week, worried that the firms would need some sort of government intervention to prevent insolvency. Panic grabbed a hold of the market after former Federal Reserve governor William Poole said that Freddie Mac is already “insolvent”; and the Journal reported Wednesday that the government was reviewing possible bailout scenarios. Even though both Fannie and Freddie were quick to say that they have plenty of capital, a sentiment echoed by Treasury Secretary Paulson, the stocks still ended the week down just over 45% for the week and about 75% for so far this year.

Investors were quick to bail in part because questions have long lingered about whether the two companies had taken on too much risk, are too leveraged, and are short on capital. But Fannie and Freddie have become so vital to the mortgage market that regulators and officials have been loathe to force change at the government-sponsored, publicly-traded companies.

Thursday appears likely to bring another Cisco (CSCO) skid. Shares of the networking giant fell 8% to $21 and change in after-hours trading Wednesday, after CEO John Chambers said the company’s customers are growing increasingly cautious as recession fears sweep the globe. He trimmed third-quarter sales-growth targets in the wake of a “challenging” January, Scott Moritz reports at TheStreet.com. Slowing spending by big U.S. companies came as no shock, given Chambers’ repeated warnings back in November that conditions were looking “lumpy.” But analyst Mark Sue at RBC, who rates the stock outperform, tells Bloomberg TV that he was a bit surprised at the latest quarter’s signs that the slowdown is hitting sales in Europe too. Still, he says he believes the stock is probably nearing a bottom at around $20 a share or so - a call that may be put to the test in coming days, given the sharp selling so far this year in big tech names from Intel (INTC) and Apple (AAPL) to Google (GOOG) and Yahoo (YHOO).