Sep 08 2008
Government takes control over Fannie and Freddie
Ending speculations, the federal government finally took over the reins of mortgage giants Freddie Mac and Fannie Mae in their hands on Sunday, September 7, 2008. This take over by the government was the last resort in the attempt of saving these companies from succumbing which if had happened would have made times all the more tougher for the housing scene in the US. The government will now assume responsibility of the companies by means of its federal regulators and also take care of all the debts of the two giants which effectively run into trillions of Dollars.
This takeover by the government is being seen as the most drastic step taken to help control the financial mess the country is stuck into ever since the housing bubble exploded. Government sources justify this move by citing reasons that the deteriorating condition of the two companies was threatening to worsen and was capable of causing irreparable harm to the mortgage market and in turn the financial economy of the Unites States. The interwoven structure of Freddie and Fannie in the US economical setup was the major reason which made the government come to its rescue.
This takeover has been pegged as to be a positive step and would in turn result in stabilizing the housing loan segment in the country thereby making home loans and mortgages easier to avail. The dividends of shareholders stand suspended. In accordance with this takeover the treasury department of the government will buy preferred stocks from the two companies in the tune of about $100 billion which will aid in ensuring that the two companies have enough capital with them so as to pay off their private debts. The treasury will also have the provision of directly lending out to these mortgage companies as and when needed throughout 2009. The department will also initiate buying of mortgage securities from brokers which will in turn keep the market healthy.