Fred Business News - The Treasury Department and Federal Reserve on Sunday outlined a comprehensive government plan to prop up Fannie Mae and Freddie Mac - the two mortgage finance giants that play a crucial role in the
Treasury Secretary Henry Paulson said the Bush administration plans to ask Congress to enact legislation to temporarily increase the line of credit that the companies have with the Treasury. It would also allow the Treasury to buy stock in the companies.
Paulson also said the Federal Reserve should be given a greater role supervising the finances of Fannie and Freddie.
In addition, the Federal Reserve announced Sunday that the mortgage finance companies can turn to the Federal Reserve Bank of
The decision by the government to step in comes at a tumultuous time for the two shareholder-owned companies, which own or back $5 trillion in home mortgages and are counted on to play a central role in the recovery of the battered housing market.
At issue is the companies' financial condition and whether their balance sheets are strong enough to continue their business of buying and guaranteeing home mortgages. The plan by the Treasury and the Fed would provide Fannie and Freddie with needed capital. Beyond that, even the promise of government support could be sufficient to calm investors.
Last week, investor concern sent shares of Fannie Mae and Freddie Mac plummeting. The selloff left shares of both firms down more than 45% for the week and about 75% for the year.
"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies," Paulson said. "Their support for the housing market is particularly important as we work through the current housing correction," he added.
Source: Cnn.com
About Fred: Fred is president of The I Team Organization. With a back ground in agriculture Fred has lead many successful business ventures.
