U.S. Government to Take Over Fledgling Mortgage Giants Fannie Mae and Freddie Mac

The U.S. federal government, citing the need to protect the interest the financial system, mortgage availability and taxpayers, will take over the devastated mortgage giants Fannie Mae and Freddie Mac.

Treasury Secretary Henry Paulson explained the decision to bail out the two companies who account for about half of all outstanding mortgages in the U.S. stating, “Fannie Mae and Freddie Mac are so large and interwoven in our financial system that a failure of either of them would create great turmoil in financial markets here and around the globe.”

Fannie Mae and Freddie Mac have lost billions in the U.S. housing crash over the past several years and further losses would result in bankruptcy as more homeowners default on loans.

Federal Reserve chairman Ben Bernanke acknowledged the importance of the bailout noting, “These necessary steps will help to strengthen the US housing market and promote stability in our financial markets.”

Under the deal the management teams of each company will be replaced and the companies will be given access to extra funding to run their business. The Federal Housing Finance Agency will administer Fannie Mae and Freddie Mac until a long-term solution is set.

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