Don't miss




Macron and Kagame meet to repair strained ties over Rwandan genocide

Read more


Remembering Philip Roth

Read more


Film show: 'Solo: A Star Wars Story', 'Angel Face' and 'Peeping Tom'

Read more


Iraq: Children of Fallujah try to rebuild their lives

Read more


Philippines moves towards allowing divorce

Read more


'We are seeking a new deal', Pompeo advisor says on Iran

Read more


Hugh Coltman serves up a New Orleans-inspired musical gumbo

Read more


Music show: Opera singer Lawrence Brownlee, Snow Patrol & Natalie Prass

Read more


Are there other universes like ours?

Read more


US to give Fannie Mae and Freddie Mac unlimited funding through 2012

Text by News Wires

Latest update : 2009-12-25

US mortgage giants Fannie Mae and Freddie Mac will receive unlimited government funding through 2012 in order to allow the firms -- which underpin trillions in mortgages and play a key role in the global financial system -- to endure any new crisis.

AFP - The US government has pledged virtually unlimited aid to mortgage finance giants Fannie Mae and Freddie Mac through 2012 to allow the government-sponsored firms to weather any new crisis.

The announcement Thursday by the US Treasury allows the government to postpone an exit strategy for aid to the two firms that underpin trillions of dollars in mortgages and play a key role in the global financial system.

Officials said they amended the congressionally mandated deadline of December 31 from the firm's September 2008 rescue.

The new agreement lifts a collective cap of 400 billion dollars in aid that can be pumped into the firms -- 200 billion dollars each -- and gives the government unlimited authority to inject funds into Fannie and Freddie if the housing crisis intensifies.

Although officials said they were not near the limit for aid, the new agreement "should leave no uncertainty about the Treasury's commitment to support these firms as they continue to play a vital role in the housing market during the current crisis."

A Treasury statement said the cap on aid would be raised "as necessary to accommodate any cumulative reduction in net worth over the next three years."

Earlier Thursday, US officials unveiled multi-million-dollar pay packages for executives at Fannie Mae and Freddie Mac in a new step back from a clampdown on executive compensation.

Documents filed by the regulator for the two firms showed Fannie Mae chief executive Michael Williams and Freddie Mac CEO Charles Haldeman could each earn up to six million dollars per year, although some of that is deferred or conditioned on the performance of the companies.

Six other high-level executives at Fannie Mae and four others at Freddie Mac could earn over one million dollars, depending on performance.

The regulator for the firms, which were seized by the government amid a meltdown in the housing market, said that even with the new pay levels, compensation for the top executives is down 40 percent from before the firms were placed in government "conservatorship."

Edward DeMarco, acting director of the Federal Housing Finance Authority, said these firms need competent executives since they play a role in funding three-fourths of all new residential mortgages.

"The enterprises must attract and retain the talent needed to accomplish these objectives," he said.

Fannie and Freddie, which are shareholder-owned, government-chartered firms providing financing for housing, were placed in government conservatorship last year when they appeared near collapse amid a housing market meltdown.

Together, they underpin some five trillion dollars in mortgages, and their failure could deal another shock to a weakened global financial system.

Since the takeover, the government has provided 60 billion dollars to Fannie Mae and 51 billion dollars to Freddie Mac to keep them from being insolvent.

The FHFA said there remain "uncertain conditions" in the housing market that could lead to further losses for Fannie and Freddie.

Thursday's announcement by the Treasury also said the government would stop purchasing mortgage-backed securities from the two firms as of December 31, saying this effort was "no longer critical to financial stability."

The Treasury said it will have purchased some 220 billion dollars worth of bonds from government-sponsored enterprises.

The announcement postpones a decision on a longer-term solution for Fannie and Freddie, which play a key role in the global financial system but are operating under government support.

The Treasury statement said the administration of President Barack Obama "is in the process of reviewing issues around longer term reform of the federal government's role in the housing market" and would offer a preliminary report around in February 2010.

The statement noted that officials envision "a transition to an environment where the private market is able to provide a larger source of mortgage finance."

Date created : 2009-12-25