Open

Coming up

Don't miss

Replay


LATEST SHOWS

MEDIAWATCH

No strategy and a beige suit

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014 (part 2)

Read more

THE WORLD THIS WEEK

The World This Week - 29 August 2014

Read more

ENCORE!

Alain Choquette: A Hilarious Magician in Paris

Read more

FOCUS

France welcomes Iraqi Christian refugees

Read more

FRANCE IN FOCUS

Emmanuel Macron: A new economy minister with a pro-business agenda

Read more

THE OBSERVERS

More of this year's best Observers stories

Read more

#TECH 24

Changing the world, one video game at a time

Read more

IN THE PAPERS

Socialist Party summer conference kicks off in explosive atmosphere

Read more

  • Exclusive: Fabius warns of further sanctions against Russia

    Read more

  • Experimental Ebola drug ‘ZMapp’ heals all monkeys in study

    Read more

  • IMF stands behind Lagarde amid French corruption probe

    Read more

  • Ukraine to relaunch NATO membership bid

    Read more

  • Suriname leader’s son pleads guilty to courting Hezbollah

    Read more

  • British killer escapes from French psychiatric hospital

    Read more

  • Chelsea’s Torres set for AC Milan switch

    Read more

  • Police hunt for British boy with brain tumour taken to France

    Read more

  • France shines in IMF list of world’s promising economists

    Read more

  • Mapping Ukraine: Canada and Russia in ‘tweet for tat’ row

    Read more

  • First case of Ebola confirmed in Senegal

    Read more

  • Obama has 'no strategy yet' on potential Syria strikes

    Read more

  • Netflix to woo French with ‘House of Cards’ set in Marseille

    Read more

  • French businesses ‘hoping for a new Thatcher’

    Read more

  • Syrian refugees surpass 3 million, UN says

    Read more

  • West backs Ukrainian claims of Russian incursion

    Read more

  • Libyan PM resigns as Islamists set up rival administration

    Read more

  • UN says 43 peacekeepers captured in Golan Heights

    Read more

  • The deleted tweets of Manuel Valls

    Read more

  • Peru seizes record 6.5 tonnes of Europe-bound cocaine

    Read more

Washington takes over Fannie Mae, Freddie Mac

Latest update : 2008-09-08

US Treasury Secretary Henry Paulson (photo) said the government had taken temporary control of the ailing mortgage giants Fannie Mae and Freddie Mac in a bid to help the economy recover from massive losses in the housing market.

WASHINGTON - The U.S. government on Sunday seized control of mortgage finance companies Fannie Mae and Freddie Mac in an aggressive move to help the distressed U.S. housing market and economy.

 

Officials were concerned mounting losses at the two companies, which own or guarantee almost half of the country's $12 trillion in outstanding home mortgage debt, was sapping their vitality and threatening to undermine them at a time other sources of housing finance have largely run dry.

 

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," U.S. Treasury
Secretary Henry Paulson said at a news conference. "Fannie Mae and Freddie Mac are critical to turning the corner on housing."

 

The decision to take control of the companies, which have $1.6 trillion in debt outstanding, and place them into a conservatorship under their regulator could amount to the largest financial bailout in U.S. history. The Treasury Department, which is taking an equity stake in the two firms, said there was no reason to expect that taxpayers would have to shoulder losses.

 

The companies have suffered combined losses of nearly $14 billion in the last four quarters and large holders of their debt, including overseas central banks, have begun to show signs of increasing nervousness over their financial health.

 

"I strongly endorse both the decision by (Federal Housing Finance Agency) Director (James) Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies," Federal Reserve Chairman Ben Bernanke said in a statement.

 

"These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," he said.

 

As part of the plan, FHFA will operate the companies until they are stabilized and the Treasury will extend financing until Dec. 31, 2009, if needed.

 

In addition to the new financing facility, Treasury said it will take an equity stake in the two firms through senior preferred equity shares and warrants.

 

"Under the terms of the agreement, common and preferred shareholders bear losses ahead of the new government senior preferred shares," Paulson said.

 

Treasury also set up a program under which it would buy mortgage-backed securities currently held by Fannie Mae and Freddie Mac to pump fresh funds into the mortgage market. It said it would begin buying MBS later this month, and it would have authority to make such purchases through Dec. 31, 2009.

 

The stocks of the two companies have fallen more than 90 percent in the past year and in recent months foreign investors have pared their holdings of the companies' securities.

 

Paulson said that Fannie Mae and Freddie Mac were so large that "a failure of either of them would cause great turmoil in our financial markets here at home and around the globe."
 

 

 

Date created : 2008-09-07

COMMENT(S)