Monday, September 8, 2008

Feds Seize Mortgage Companies

The big news of course is the Federal government's takeover of mortgage giants Fannie Mae and Freddie Mac. The two companies are the largest providers of money for home mortgages in the US.

The US Treasury has pledged up to $200 billion to help offset losses suffered as a result of bad mortgages. The operation of the companies will be handled for now by the FHA.

It is hoped that the move will help to stabilize the housing market which has been in decline over that last several years. Secretary of the Treasury, Henry Paulson, said that a simple equity investment in the companies was deemed to not be enough to rescue them or stabilize the market. Paulson said the risk of doing nothing was worse than the burden of the responsibility for billions of dollars in loans made by private lenders.

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