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In a move to prevent a complete demise of the US home loan market, the US Government has announced a plan to bail out troubled government-sponsored lenders Freddie Mac and Fannie Mae.
Treasury secretary Henry Paulson said on Sunday US time that he was working with Congress to develop an immediate plan of action, which included a temporary increase in the line of credit available to the pair – expected to total up to $300 billion.
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Mr Paulson also announced a plan for temporary authority for the Treasury to purchase equity in the entities to ensure they were sufficiently capitalised.
“Fannie Mae and Freddie Mac play a central in our housing finance system,” Mr Paulson said.
The continued strength of GSE debt was crucial to maintain confidence and stability in the financial system, he said, therefore “ we must take steps to address the current situation as we move to a stronger regulatory structure”.
Published: 15-07-08
