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US Govt moves to support Fannie Mae and Freddie Mac

The US Government has moved to provide support to troubled mortgage lenders Fannie Mae and Freddie Mac after concerns over their solvency.

Treasury secretary Henry Paulson announced last night that the Government will extend its line of credit to the two lenders.

He also said the Treasury could buy equity capital in Fannie Mae and Freddie Mac if it was needed.

The two lenders guarantee around £2.5 trillion of the USA’s £6 trillion home loans.

Fannie Mae president and chief executive officer Daniel Mudd stressed it continues to hold more than adequate capital reserves but welcomed the new proposals.

He said: “We are grateful for the leadership of Secretary Paulson and Chairman Bernanke. We look forward to working with Treasury, OFHEO and Congress on swift passage of the new
legislative proposals, as well as the important initiatives underway to assist homeowners and help restore stability to the housing market.

“We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets. Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market. We will continue to do our part to provide liquidity, stability and affordability to the housing market now and in the future.

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