Why feds are seizing two lenders
Economy: Fannie Mae, Freddie Mac taken over
Why feds are seizing two lenders

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By The Associated Press
Published: September 8, 2008

WASHINGTONPresident Bush said Sunday that the historic federal government takeover of mortgage giants Fannie Mae and Freddie Mac is needed to keep them from failing, a risk he called "unacceptable” for an economy battered by housing and credit crises.

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The Bush administration announced Sunday it was taking control of the two institutions to avert the potential for major financial turmoil.

The move won support from both presidential campaigns, but private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.

Mark Zandi, chief economist at Moody's Economy.com, predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent. That's because investors will be more willing to buy the debt issued by Fannie and Freddie — and at lower rates — since the federal government is now explicitly standing behind that debt.

"Effectively, the federal government has now become the nation's mortgage lender,” he said. "This takes a major financial threat off the table.”

Futures on all major stock indexes rose about 2 percent in electronic trading Sunday night, another sign of investor relief about the takeover plan.


 


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That's what we need, the federal government in business. They have shown they really know what they are doing in terms of money and finance.
Jess, Warr Acres - Sep 8, 2008 at 8:28 am
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