The US Government and Federal Reserve last night announced measures to shore up ailing lenders Fannie Mae and Freddie Mac.
In a move to avoid collapse of the nation's two largest mortgage agencies, the US Treasury will ask Congress to expand the access to credit available to the companies, as well as approval to buy equity if needed.
The Federal Reserve will also bail out the beleaguered lenders, announcing the New York Fed will lend to Fannie and Freddie if necessary.
Stability at the two firms is paramount for the US mortgage market, as Fannie and Freddie own or guarantee almost half of all US home loans – more than $5trn of debt.
Fannie and Freddie share prices have fallen by more than 50% in the past week, as concerns on capital levels fuelled rumours of Government nationalisation.
US Treasury secretary Henry ‘Hank’ Paulson dismissed speculation of Government “contingency planning”.
“Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission,” he says.IFAonline
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