Mortgage Takeover
Yesterday the United States Treasury Department announced it would move to take over control of the massive U.S. lenders Fannie Mae and Freddie Mac in an attempt to ease the U.S. mortgage crisis and its global ripple effects. The move is the largest such nationalization in decades and is intended to prevent a collapse at either of the institutions, the combined net value of which exceeds $5 trillion. The takeover could remove a major source of economic insecurity for financial markets, which had long feared a collapse at one of the major mortgage lenders would trigger a wave of housing mortgage defaults and, in turn, prompt bank failures. Global stocks rallied on the news, with major indices in Europe and Asia jumping over 3 percent (BBC)
Questions linger, however, about how the takeover will shake out economically. The Wall Street Journal reports that it marks a new, "uncharted phase" of the U.S. mortgage crisis in which U.S. taxpayers could be liable for billions of dollars of write downs at Fannie and Freddie.
Fannie and Freddie were essentially already on the U.S. balance sheet, Wolf says, in the sense that the risks associated with their collapse were intricately wound up in U.S. economic prospects.
Still, the New York Times reports many individuals stand to suffer large-scale losses following the takeover. Shareholders of the lending giants are likely to get largely wiped out, analysts say, as their money will be among the first to go toward writeoffs.
Questions linger, however, about how the takeover will shake out economically. The Wall Street Journal reports that it marks a new, "uncharted phase" of the U.S. mortgage crisis in which U.S. taxpayers could be liable for billions of dollars of write downs at Fannie and Freddie.
Fannie and Freddie were essentially already on the U.S. balance sheet, Wolf says, in the sense that the risks associated with their collapse were intricately wound up in U.S. economic prospects.
Still, the New York Times reports many individuals stand to suffer large-scale losses following the takeover. Shareholders of the lending giants are likely to get largely wiped out, analysts say, as their money will be among the first to go toward writeoffs.
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