Freddie Mac and Fannie Mae taken by US government

Southeast Asia News.Net
Sunday 7th September, 2008

The Bush administration has seized troubled mortgage giants Fannie Mae and Freddie Mac.

The historic move on the weekend was designed to save the private institutions from succumbing to the prolonged housing and credit crisis.

Economic analysts have already come out to say the takeover is a US$200 billion bet that may not reverse the fortunes of the mortgage giants.

Shares in Fannie Mae and Freddie Mac have slumped due to glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Officials announced that both giant institutions were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars.

Treasury Secretary Henry Paulson said the businesses need to be protected as their failure would "create great turmoil in our financial markets here at home and around the globe."

The Treasury Department said it was prepared to put up as much as US$100 billion over time in each of the companies if needed to keep them from going broke, in exchange for stock in the companies.

Both presidential candidates applauded the intervention with Barack Obama saying: "I will be reviewing the details of the Treasury plan and monitoring its impact to determine whether it achieves its key benchmarks."

Republican presidential nominee John McCain also voiced support while his running mate, Alaska Gov. Sarah Palin, said that Fannie and Freddie "have gotten too big and too expensive to the taxpayers.”

Have your say on this story