
US nationalises Fannie and Freddie
Daily news headlines
WASHINGTON, DC – The US government has rescued the mortgage lenders Fannie Mae and Freddie Mac, confirming market expectations by taking responsibility for almost half of the $12 trillion of US mortgage debt.
The move, dubbed ‘conservatorship’, means temporary nationalisation of the two state-sponsored lenders, and marks the moment when the long-presumed unwritten guarantee of the two lenders was finally tested.
Fannie and Freddie had already run up debts of over $1.6 trillion over the past 12 months, mostly as a result of the fall in house prices brought on by the failure of the subprime mortgage sector.
The US government had already agreed to buy up shares in the two lenders, in addition to initiating Treasury protection schemes guaranteeing their debts. Yesterday’s agreement marks the end of that process.
Chairman of the Federal Reserve, Ben Bernanke, said in a statement: “I strongly endorse both the decision by FHFA [Federal Housing Finance Agency] director [James] Lockhart to place Fannie Mae and Freddie Mac into conservatorship, and the actions taken by Treasury secretary [Henry] Paulson to ensure the financial soundness of those two companies.”
He said: “These necessary steps will help to strengthen the US housing market and promote stability in our financial markets. I also welcome the introduction of the Treasury's new purchase facility for mortgage-backed securities, which will provide critical support for mortgage markets in this period of unusual credit-market uncertainty.”
Fannie Mae and Freddie Mac were created by President Roosevelt in 1938, as part of his ‘New Deal’ to provide liquidity to the US mortgage market during the Great Depression, before privatisation in 1968.
Fannie Mae and Freddie Mac – after already undergoing boardroom purges within the past month – are now under the control of the FHFA.
Only users who have a paid subscription or are part of a corporate subscription are able to print or copy content.
To access these options, along with all other subscription benefits, please contact info@risk.net or view our subscription options here: http://subscriptions.risk.net/subscribe
You are currently unable to print this content. Please contact info@risk.net to find out more.
You are currently unable to copy this content. Please contact info@risk.net to find out more.
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Printing this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
Copyright Infopro Digital Limited. All rights reserved.
You may share this content using our article tools. Copying this content is for the sole use of the Authorised User (named subscriber), as outlined in our terms and conditions - https://www.infopro-insight.com/terms-conditions/insight-subscriptions/
If you would like to purchase additional rights please email info@risk.net
More on Regulation
Grim repo warning spotlights BNP Paribas booking model
Federal regulators may be targeting French bank’s Paris-based book of US Treasuries
We’re all outliers now: Europe’s unflattering IRRBB test
Banks, fearing overreaction from supervisors, urge European Commission to reject NII-based assessment
SEC targets ‘dark magic’ in fixed-income pricing with Bloomberg fine
US regulator is going after pricing vendors that deviate from their published methodologies
Alameda’s mystery bank stake reignites Fed deposit debate
Crypto challenger Custodia accuses regulator of unlevel playing field over master accounts
More EU banks will fail new IRRBB test as rates push upwards
Half of all EU banks could cross outlier threshold for new test of net interest income
Finra head recognises ‘challenges’ for bond transparency drive
Cook says regulators thinking about industry’s operational and liquidity concerns
Why central banks shouldn’t ignore stablecoins
Rapid growth of stablecoins could impair monetary policy transmission
Hedge funds doubt tall tales around UK short-selling review
FCA has never used powers to ban short-selling, but reporting tweaks would be welcome