Government Saves Fannie
July 13, 2008
The Treasury announced today that it will expand it's role in helping Fannie Mae and Freddie Mac. In a somewhat expected move, the Treasury has announced it will expand it's line of credit facility with the two mortgage giants, and they will open the door to making a direct investment into the two publicly traded corporations.
"Fannie Maeand Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."
Shares in recent days have plunged and many investors feared the end of the two mortgage giants was near. The move today by the Treasury has full support of the Bush administration and follows the move by the Federal Reserve to open the discount window to the GSEs.
Fannie Mae and Freddie Mac hold or garauntee nearly 6 trillion dollars with of US mortgage backed securities. They play a vital role in the mortgage backed securities market and without them the industry would shut down. The latest move by the Federal Government is another attempt to deal with the mortgage meltdown that started in early 2007. What many have referred to as "The ARM Time Bomb", has caused billions of dollars in losses to banks across the country.
Secretary Hank Paulsonis working with Congress to ensure that this next step is going to provide the right solution to this ongoing problem. Support in the house is wide spread as a solution to helping American's buy homes again is in everyone's best interest. California home loans have been more difficult to obtain since early 2007 as the mortgage market continues to correct.
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