U.S. Weighs Takeover of Two Mortgage Giants

STEPHEN LABATON and STEVEN R. WEISMAN
NY Times
Friday, July 11, 2008

WASHINGTON — Alarmed by the growing financial stress at the nation’s two largest mortgage finance companies, senior Bush administration officials are considering a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen, people briefed about the plan said on Thursday.

The companies, Fannie Mae and Freddie Mac, have been hit hard by the mortgage foreclosure crisis. Their shares are plummeting and their borrowing costs are rising as investors worry that the companies will suffer losses far larger than the $11 billion they have already lost in recent months. Now, as housing prices decline further and foreclosures grow, the markets are worried that Fannie and Freddie themselves may default on their debt.

Under a conservatorship, the shares of Fannie and Freddie would be worth little or nothing, and any losses on mortgages they own or guarantee — which could be staggering — would be paid by taxpayers.

(Article continues below)

The government officials said that the administration had also considered calling for legislation that would offer an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies. But that is a far less attractive option, they said, because it would effectively double the size of the public debt.

The officials also said that such a step would be ineffective because the markets already widely accept that the government stands behind the companies.

Full article here

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3 Responses to “U.S. Weighs Takeover of Two Mortgage Giants”

1. nikoli Says:
   July 11th, 2008 at 9:07 am

   here have 5 trillion dollars america… yeah right….

   is then even that much bank notes in circulation….???

   5 trillion dollars,… how much room would that take up…

   can a country pay a debt like that, and the people to still live free and not be slaves… to live well and not slave to pay off a 5 trillion dollar debt….

   easy way out…. kill the people you own 5 trillion dollars to…

2. Upset Americain Says:
   July 12th, 2008 at 4:39 am

   Another bailout…..who is gonna bail me out when i make stupid decisions….nobody thats who. This is a big joke and the crooks are laughing all the way to the bank. I am sure all the heads of these failing banks have cashed in and have jumped ship and now the government socialist empire is going to bail out and charge it to the taxpayers. People should be rioting in the streets over this….5 trillion with a “T” folks. Wake the #&%* up!!!!

3. Luke Orlosky Says:
   July 12th, 2008 at 6:37 pm

   How many zeros in a billion? 9 and 12 in a trillion.

   The next time you hear a politician use the word ‘billion’ in a casual manner, think about

   whether you want the ‘politicians’ spending YOUR tax money.

   A billion is a difficult number to comprehend, but one advertising agency did a good job of

   putting that figure into some perspective in one of it’s releases.

   A.

   A billion seconds ago it was 1959.

   B.

   A billion minutes ago Jesus was alive.

   C.

   A billion hours ago our ancestors were living in the Stone Age.

   D.

   A billion days ago no-one walked on the earth on two feet.

   E.

   A billion dollars ago was only 8 hours and 20 minutes,

   at the rate our government is spending it.