JSMedia – The Federal Reserve announced yesterday that it would step in to bail out the troubled mortgage giants, Fannie Mae and Freddie Mac. The rescue will put these companies under federal control and replace their CEOs, but it will also prop them up financially. The news has many people in the financial industry scratching their heads, wondering whether the government is taking the right steps. Here are three reasons why the Feds decided to intervene.
The government is planning to announce its decision on Sunday, which would be before Asian markets open. Treasury Secretary John Paulson has been wrestling with the steady erosion of the mortgage finance giants for months. In this case, the debate is over whether to seize the companies, or allow them to sort out their own problems. The government will continue to face debates over their long-term viability and independence. But there is no doubt that the rescue of the two biggest mortgage lenders will help the economy.
The Feds are already considering whether to take on the companies and ensure their long-term survival. Taking over the companies’ debts would allow the government to wrest control of them and regain control of the economy. Moreover, it would also protect the country’s financial system from a collapse. Fortunately, the government is not in the business of making decisions for the financial industry. Nevertheless, it will help them to stay afloat in the meantime.
Feds Rescue Two Major Mortgage Lenders
The Feds rescue of Freddie Mae and Fannie Mae is a great step toward improving the economy. Both firms are expected to be open for business on Monday, with former CEOs Richard Syron and Daniel Mudd assuming their roles as CEOs. Despite all the challenges facing the industry, regulators did not blame the former Freddie CEOs for their actions. Herb Allison, the new CEO of Fannie Mae, is a financial veteran with experience in the mortgage industry. He was previously president of Merrill Lynch.
The U.S. Treasury’s decision to rescue Freddie Mac and Fannie Mae is another example of how the government is stepping in. The government is rescuing these institutions to keep them current on their mortgages. The Federal Reserve is offering them a loan of $160 billion in the last couple of days. Besides, it provides a temporary solution to the credit crisis by easing mortgage defaults.
The top banking regulators of Fannie Mae and Freddie Mac have outlined plans to rescue the mortgage firms. The government’s plan to buy up these two companies’ loans will require a lot of time to complete, but this is an extremely positive step. While the company faces a difficult situation, the government has already taken action to protect its citizens. The Federal Reserve has pledged to provide capital to Fannie and Freddie.
The Bush administration has taken steps to rescue the mortgage lenders. While the government has not been able to prevent Freddie Mac from defaulting, it has given it the ability to step in to help them if they fall into financial crisis. The administration has taken a bigger role in the mortgage industry to help stabilize the housing market and make mortgages more affordable. Aside from providing much-needed liquidity, the two major lenders may be forced to sell their assets to avoid a bankruptcy.
In the process of rescuing the mortgage sector, the Feds took steps to make the firms more viable. These mortgage giants have been unable to meet the needs of the American people in the past decade. In addition to the relief efforts, the banks will now offer loan modifications to those who cannot afford their mortgage payments. They are also required to provide options to their customers, including moving missed payments to the end of the mortgage term.
Moreover, the government has taken measures to help the two major mortgage lenders. These companies have been unable to make a profit since the 2008 financial crisis hit the economy. They are now unable to raise their share prices. In response, the government is now reducing their debt. The plan will allow Fannie Mae and Freddie Mac to buy mortgages from other investors. These loans can now be sold to other investors.