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How about a little help for those losing their homes?
The top five foreign holders of Freddie and Fannie long-term debt are China, Japan, the Cayman Islands, Luxembourg, and Belgium.
$376 Billion in Chinese Agency Bond Holdings Subject to Taxpayer Bailout Proposals According to FreedomWorks Analysts
``It looks like the Bush administration is going to intervene with a bailout that could end up costing taxpayers billions of dollars,'' Obama, the Democratic nominee, said today while campaigning in Terre Haute, Indiana. ``These entities are so big and they are so tied into the housing market that it's probably true that we have to take steps to make sure that they don't just collapse.''
``We've got to keep people in their homes. There's got to be restructuring, there's got to be reorganization, and there's got to be some confidence that we've stopped this downward spiral,''
US takes over key mortgage firms
US financial officials have outlined plans for the government to take over the failing mortgage giants Freddie Mac and Fannie Mae.
The two companies account for nearly half of the outstanding mortgages in the US, and have lost billions of dollars during the US housing crash.
The most recent figures show about 9% of US homeowners were behind on their payments or faced repossession.
The federal takeover is one of the largest bail-outs in US history.
As part of the changes, the management of the two companies will be replaced and the firms will be given access to extra funding to support their business going forward.
Treasury Secretary Henry Paulson said the government was intervening in the wider interests of the financial system and of taxpayers since the financial position of the two firms was fast deteriorating.
He added that the two firms' debt levels posed a "systemic risk" to financial stability.
"We examined all options available and determined this comprehensive and complementary set of actions best met the objectives of market stability, mortgage availability and taxpayer protection," he said.
The move is intended to keep the two companies afloat, amid fears that either could go bankrupt as borrowers default on their home loans.
Together, Freddie Mac and Fannie Mae own or guarantee about $5.3 trillion (£3 trillion) of mortgages.
Banks around the world are highly exposed to the two companies and therefore, given the febrile state of markets across the world, it had become dangerous for doubts to persist about whether they were viable and would be able to keep up the payments on their massive liabilities, says the BBC's business editor Robert Peston.
A rescue plan passed by Congress in July gave the US government the authority to offer unlimited liquidity to the two companies, and to buy their shares, in order to keep them afloat.
Fannie, Freddie, Cheshire and Derbyshire
Robert Peston 7 Sep 08, 02:54 PM
After a brief period of calm in the summer, new disturbing evidence has been disclosed today of the weakened condition of financial institutions, both big ones and smaller ones.
The US Government is in effect nationalising North America's two biggest providers of finance for the housing market, Fannie Mae and Freddie Mac.
Their regulator, the Federal Housing Finance Agency, is taking direct control of them under a system known as "conservatorship".
This is an event of profound significance for the global economy, since these two eccentric institutions own or guarantee almost £3000bn of US mortgages.
Banks, including some of the world's most important central banks, have direct and substantial financial exposure to both Fannie and Freddie.
So, given the febrile state of markets across the world, it has become dangerous for doubts to persist about whether these two are viable and would be able to keep up the payments on their massive liabilities.
What's brought Fannie and Freddie to this humiliating impasse?
Well there's the continued decline in the US housing market, the sorriest housing market on the globe (for all the falls in UK house prices).
And then there's the discovery by Morgan Stanley, the investment bank advising the US government, that Freddie's capital resources are smaller than meets the eye.
For the US Treasury, the bailout could turn out to be one of the most expensive financial rescues in history, running to tens of billions of dollars.
Bad news, except perhaps for our own Chancellor of the Exchequer, Alistair Darling - since the Fannie and Freddie rescue costs may well make the potential losses for the taxpayer from Northern Rock seem almost modest (well almost).
Also the US banking debacle gives a bit more credibility to Darling's claims that the UK's economic and financial woes are at least in part the consequence of a global storm, for which he shouldn't be blamed too much.
In fact, while I write, two of our own housing-finance institutions are being steered by the Financial Services Authority into safe harbour, as the Nationwide negotiates to take ownership of two rival building societies, the Cheshire and the Derbyshire.
These are tiny compared with Fannie and Freddie, but they are not trivial in a UK context.
Derbyshire is the UK's ninth largest building society with £7bn of assets and the Cheshire is number 11 with £5bn. Together they have not far off a million customers.
But each has a structural flaw which makes it harder for them to carry on as an independent.
Derbyshire is perhaps a bit too dependent on funding from wholesale financial markets, which since the onset of the credit crunch last summer has been much harder to obtain.
And Cheshire has a commercial property business that is not in the greatest shape.
So although neither of them are bust and there is no reason for their depositors to be unduly alarmed (their savings are safe), the City watchdog, the FSA, wants them under the stewardship of the more robust Nationwide.
The harsh reality of the decline in the housing market means that the members of the Derbyshire and the Cheshire should not expect a windfall or any kind of payment from this deal.
Nor will they get a vote on whether the mergers will go through, as normally happens in consensual deals.
I have learned that the FSA will use its power to force through the transfer of ownership fairly speedily - because any period of uncertainty about the ownership of a bank or building society right now is fraught with risks.
Originally posted by spitefulgod
Humm, a financial market failure that allows the "government" to buy our corperate firms for a pittance, where've I seen this before???
Well we all know the "government" will be selling these shares to certain other companies when the market comes back on track, how convenient .
Officials announced that the executives and board of directors of both institutions had been replaced. Herb Allison, a former vice chairman of Merrill Lynch, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.
Originally posted by yellowcard
Blah Blah Blah, the Federal Reserve System is a brilliant system..y