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Saving Fannie and Freddie
Fannie Mae and Freddie Mac are the two biggest mortgage giants out there and they play a crucial role in the U.S. economy. Their stocks have been slipping for some time, despite the fact that they’ve both said their respective companies were fine. But with another slip over the weekend, the government has decided to intervene and save them before they fail.
The plan includes increasing their lines of credit with the U.S. Treasury and allowing them access to the Federal Reserve Bank of New York, which is the same access that commercial banks and Wall Street firms have. In addition, new legislation would allow the Treasury to buy stocks within these two companies. However, part of the plan would include allowing the Federal Reserve to have a greater role in supervising the finances of these two companies.
Between the two companies, they back and guarantee $5 trillion in home mortgages and are being counted on to help the nation rebound from the current crisis. However, investors have had some concerns about how strong the balance sheets really are, so the government is hoping the additional capital, as well as their involvement, will help calm their fears.
Does the decision of the government to get involved make you feel better about the situation, or worse? [CNN Money]