by Deb Cupples | Friday, I talked to Chris Conner (Buck Naked Politics' guest blogger on finance and investment issues). Chris predicted that the federal government would do something over the weekend (before the Asian markets opened) to help Fannie Mae and Freddie Mac -- two quasi-governmental mortgage companies that seem to be in far more trouble than one federal regulator had led us taxpayers to believe. Not surprisingly, Chris was right.
Today's New York Times reports:
"Alarmed by the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration on Sunday asked Congress to approve a sweeping rescue package that would give officials the power to inject billions of federal dollars into the beleaguered companies through investments and loans.
"In a separate announcement, the Federal Reserve said it would make one of its short-term lending programs available to the two companies, Fannie Mae and Freddie Mac. The Fed said that it had made its decision “to promote the availability of home mortgage credit during a period of stress in financial markets.”
"An official said that the Fed’s decision to permit the companies to borrow from its so-called discount window was approved at the request of the Treasury but that it was temporary and would probably end once Congress approved Treasury’s plan. Some officials briefed on the plan said Congress could be asked to extend the total line of credit to the institutions to $300 billion.
"The actions, which taken together could provide an overwhelming surge of capital to the companies, were the second time in four months that the housing crisis had prompted the government to scramble over a weekend to rescue a major financial institution. Last March, the Treasury Department engineered the sale of Bear Stearns to prevent it from going into bankruptcy and cause a shock to the financial system.
"The plan was disclosed on Sunday evening to calm jittery markets overseas and on Wall Street in advance of a debt sale by Freddie Mac on Monday morning." (NY Times)
There's a reason that I go to Chris for info and explanations. Memeorandum has commentary.
Posts by Chris:
* Thumbnail Primer on "Permanent" Life Insurance
* Shaken, not Stirred: Thoughts on Market Volatility
* What the Dow Jones Industrial Average Means to You
.
Comments