U.S. Government Considering Takeover Of Fannie And Freddie
SOURCE: The New York Times
Due to the heavy loses that both Fannie Mae and Freddie Mac have been experiencing their shares have been dropping rapidly causing their borrowing costs to rise. The Bush administration is considering a government takeover that will place them in a conservatorship if things continue to worsen for the two mortgage giants.
The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing (and commercial lending) market.
It is felt that if the difficulties that Fannie and Freddie are experiencing aren't resolved, economies worldwide could be damaged. This is in part because the securities of both Fannie and Freddie are held by many financial institutions, central banks, and investors overseas.
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Due to the heavy loses that both Fannie Mae and Freddie Mac have been experiencing their shares have been dropping rapidly causing their borrowing costs to rise. The Bush administration is considering a government takeover that will place them in a conservatorship if things continue to worsen for the two mortgage giants.
The companies are by far the biggest providers of financing for domestic home loans. If they are unable to borrow, they will not be able to buy mortgages from commercial lenders. In turn, that would make it more expensive and difficult, if not impossible, for home buyers to obtain credit, freezing the United States housing (and commercial lending) market.
It is felt that if the difficulties that Fannie and Freddie are experiencing aren't resolved, economies worldwide could be damaged. This is in part because the securities of both Fannie and Freddie are held by many financial institutions, central banks, and investors overseas.
Read full report »
