Foreclosures Scathing Freddie And Fannie
Posted on July 25, 2008
Filed Under Foreclosure Homes | Leave a Comment
Foreclosures like Frankenstein have risen to scathe even Freddie and Fannie – the architects and perpetrators of the sub-prime crisis according to many experts. Federal Reserve bank examiners and the Comptroller of Currency are checking the books of Fannie Mae and Freddie Mac. While this goes on, the Bush administration is in a hurry to push in billions of dollars to prop up these two mortgage giants. The fall out from the foreclosure crisis is reaching its tentacles far and wide – something that had never been thought of. It is no longer the case of the humble ordinary borrower biting the dust.
Henry Paulson Jr. the treasury secretary said at a meeting with reporters last Monday that the books of the two mortgage companies are being scrutinized because of the decline in its stock prices. This has caused widespread tension in the market. Freddie Mac and Fannie back up almost half of all the mortgages in the country. Washington hopes to bail out the real estate market from the quick sands of foreclosures.
Paulson expressed his confidence in the companies still having enough cash to cushion further fall in the real estate market. He does not have any plans to exercise the new authority that is being sought in the near future. The Congress is extremely worried about the financial health of Freddie and Fannie. Many are wondering whether it will be wise to give unconditional support without understanding the implications of the possible losses emanating from the mortgage securities either owned or guaranteed by the two mortgage giants. Many are of the strong opinion that if the real estate falls further it is doubtful if Freddie and Fannie will be able to absorb the shock. If the government injects in funds for them ultimately the taxpayer will have to bear the burden.
The Fed and the Comptroller are also concerned about the duo because many of the banks hold Fannie and Freddie debts. The banks, to help them selves out of a temporary lean period, often use these securities. Paulson hoped that as a result of the examination of the books that is going on, important signals would be given out and the confidence of the market will be regained. As a part of a campaign to gain public support and confidence Paulson appeared on CNBC, Face of the Nation show and a CBS talk show.
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