Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

Is Carla Bruni against a political comeback for Sarkozy?

Read more

DEBATE

Clone of Pakistan Protests: Democracy put the test (Part Two)

Read more

DEBATE

Pakistan Protests: Democracy put the test (Part One)

Read more

ENCORE!

The French Maestro of Soul

Read more

FOCUS

US tobacco giants want lion's share of e-cigarette business

Read more

ENCORE!

Bold and bonkers: Kate Bush is back on stage

Read more

THE INTERVIEW

Simon Serfaty, US foreign policy specialist

Read more

IN THE PAPERS

'It's a War, Stupid!'

Read more

BUSINESS DAILY

French PM calls on ECB to go further to help economy

Read more

  • UN backs inquiry of IS group’s alleged crimes in Iraq

    Read more

  • French education ministry picture sparks racist abuse

    Read more

  • Video: Ukraine’s children return to school as fighting rages on

    Read more

  • US urges Israel to reverse West Bank land seizure

    Read more

  • Lesotho PM calls for regional peacekeeping force after ‘coup’

    Read more

  • Ukrainian forces retreat from Luhansk airport after clashes

    Read more

  • Teddy Riner, France’s unstoppable judo champion

    Read more

  • Death toll rises in Paris apartment building blast

    Read more

  • Iraqi forces free Amerli in biggest victory over IS militants since June

    Read more

  • French police arrest hungry hedgehog hunters

    Read more

  • Tripoli under control of militias, says government

    Read more

  • Monaco’s Falcao set for Man Utd loan on transfer deadline day

    Read more

  • Spain orders custody for parents of ill British boy

    Read more

  • Anti-government protesters storm Pakistan's state TV

    Read more

  • Putin calls for talks on 'statehood' for east Ukraine

    Read more

  • Web doc on French self-immolation protests takes top prize

    Read more

Bailout speculations surround mortgage giants

Latest update : 2008-08-21

As mortgage giants Freddie Mac and Fannie Mae sink deeper into financial troubles, rumours have been raised about the possibility of extensive financial aid from the American government.

Speculation about the stressed financial health of US mortgage-finance giants Fannie Mae and Freddie Mac swirled Wednesday as their share prices further plummeted.

The two mortgage giants, which prop up a large part of the US mortgage market, have been at the center of a financial storm in recent weeks, especially after both companies revealed hefty second-quarter losses.

A Wall Street Journal report Wednesday said Freddie Mac has been forced to offer "unusually rich terms" to investors in relation to a three-billion-dollar securities auction.

The Treasury, which was recently empowered by Congress and US President George W. Bush to extend credit and pump liquidity into Fannie Mae and Freddie Mac if necessary, is keeping a close watch on the companies' fortunes.

"As you would expect, we have been in communication with the companies for months to receive updates. We’ve also been communicating with their regulator and the Federal Reserve," Treasury spokeswoman Jennifer Zuccarelli told AFP.

But investors continue to sell the companies' stocks.

Fannie Mae's shares were down a heavy 17.1 percent at 4.98 dollars in late morning trading, while Freddie Mac was 20.1 percent lower at 3.30 dollars.

Both companies' shares have fallen heavily in the past year since a credit crunch erupted last August, triggering losses at the two firms.

The Treasury on Monday had played down a report by Barron's weekly suggesting the government could be poised to extend significant financial aid to the struggling mortgage-finance giants.

Zuccarelli said Monday that the Treasury had no intention of using its special authority to extend emergency financial aid to the ailing companies.

Fannie Mae chief executive Daniel Mudd told the CNBC business channel Wednesday morning that the company had not asked the government for financial assistance. He also said such assistance had not been offered by the government.

The two firms, which are chartered by Congress to boost home ownership but are shareholder-owned, have endured hefty losses amid a lingering US housing market slump and as losses on mortgage securities continue rattling credit markets.

Concern about the two firms has unsettled investors because together they own or guarantee some 5.2 trillion dollars in loans, or about 40 percent of the total value of home loans in the United States.

Bush sought to restore confidence in the two mortgage finance giants as well as the wider housing market by recently approving a sweeping housing rescue plan -- the Housing and Economic Recovery Act of 2008 -- designed to help 400,000 homeowners avert foreclosure.

The bill, which Bush signed into law late last month, empowers the Treasury to extend credit to Fannie Mae and Freddie Mac if Treasury Secretary Henry Paulson deems such a move necessary.

Date created : 2008-08-20

COMMENT(S)