Yesterday, in a dramatic turn of events, the United States government seized control of the Fannie Mae and Freddie Mac companies in an effort to truncate the mortgage giants' negative influence on global markets as the housing market flails.
This new plan puts the companies under a government conservatorship and replaces their management. In addition, "The plan also commits the government to provide as much as $100 billion to each company to backstop any shortfalls in capital. It enables the Treasury to ultimately buy the companies outright at little cost. It bans them from lobbying the government...." Both companies are also required to shrink their portfolios in the future, and the government intends to "buy significant amounts of their mortgage-backed securities on the open market, beginning with the purchase of $5 billion worth this month."
Stephen LaBaton and Edmund Andrews of the New York Times comment that, "[The takeover] could become one of the most expensive financial bailouts in American history, though it will not involve any immediate taxpayer loans or investments."
Click here to read the article in its entirety, including further details of the rescue plan and commentaries from presidential candidates and top investors.
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