Mon 14 Jul 2008
Rescue plan for US loan giants
US Treasury will plough billions of pounds into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.US policymakers will seek unlimited authority from Congress to lend money to the troubled mortgage groups Fannie Mae and Freddie Mac, and invest in their equity, in an attempt to avoid full-blown US mortgage crisis.
The two companies lost more than half their market value last week as rumours of a government bail-out swept the stock markets, hammering share prices around the world.
The Federal Reserve has already announced that it will give the two mortgage giants access to emergency funds on the same terms as banks, “should such lending prove necessary.”
The rescue plan, announced by Treasury secretary Hank Paulson, came after a weekend of crisis talks involving Mr Paulson, Fed chairman Ben Bernanke, and New York Fed chief Tim Geithner.
It goes further than many market experts anticipated. In effect the government is seeking full discretion to inject both debt and equity into Fannie and Freddie, which own or guarantee more than $5,300bn in US mortgages, and take them over if necessary.
In a statement Mr Paulson said: “[Fannie Mae and Freddy Mac] play a central role in our housing finance system and must continue to do so in their current form.”
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Posted by Marc Da-Silva
in Ben Bernanke, Fannie Mae, Freddie Mac, Hank Paulson, News, The Federal Reserve, Tim Geithner, US Treasury on Mon 14 Jul 2008
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