In a dramatic effort to quell the crisis surrounding Fannie Mae and Freddie Mac the US government announced last night that it will seek unlimited authority from Congress to inject both debt and equity in the troubled mortgage groups and take them over if necessary. The rescue plan, announced by Treasury secretary Hank Paulson after talks with Ben Bernanke, Fed chairman, and Tim Geithner, NY Fed chief, goes further than many market participants expected. The extent of the move reflects Washington’s fears that failure to bolster Fannie and Freddie could deepen financial turmoil, undermining domestic and foreign investors’ fragile confidence in US capital markets and the dollar. Meanwhile, the FT’s Willem Buiter says it’s “time for comrade Paulson to pull the plug on the Fannie and Freddie charade”.

- Treasury statement 

This entry was posted by James Fontanella on Monday, July 14th, 2008 at 5:39 and is filed under Capital markets, People. Tagged with ben bernanke, Fannie Mae, freddie mac, hank paulson. Edit this entry.