Monday, September 8, 2008

Fed Bails Out Mortgage Agencies

From Bloomberg:
"The U.S. Treasury's takeover of Fannie Mae and Freddie Mac is aimed at
keeping the companies going into 2009, while leaving the next president and
Congress to decide their long-term structure.
Treasury Secretary Henry Paulson and Federal Housing Finance Agency Director James Lockhart yesterday placed the two firms in a
government-operated conservatorship, ousting their chief executives and
eliminating their dividends. The Treasury may purchase up to $200 billion of
stock in the firms to keep them solvent.
``Some of this is a stopgap to try
to prevent the mortgage market from falling apart,'' former Federal Reserve Bank
of St. Louis President William Poole said on Bloomberg Radio. The federally
chartered, shareholder-owned structure, with risks covered by taxpayers, is ``an
unacceptable situation,'' he said, projecting the Treasury may need to cover as
much as $300 billion of losses. "

No comments: