Federal regulators have ordered Fannie Mae and Freddie Mac to start buying $40 billion of troubled mortgage bonds each month as the U.S. government tries to revive the economy, according to a published report.
Fannie and Freddie were taken over by the U.S. government in early September, in the first of several bailouts the government has launched recently to try to halt the spread of the mortgage-fueled credit crisis.
Regulators initially restricted Fannie and Freddie's growth when they seized control. To "promote stability" and lower mortgage costs to borrowers, Treasury Secretary Henry Paulson said the two companies would be allowed to "modestly increase'' their mortgage portfolios to as much as $1.7 trillion through the end of next year and said they would no longer be run "to maximize shareholder returns."
Less than two weeks later, Fannie and Freddie were told to ramp up their mortgage bond purchases as the financial crisis deepened and credit activity came to near standstill, Bloomberg said.
Bottom line. These are the companies are the heart of the current problems. Now they are in charge of solving the same problems they created. Wow! And now profit is no objective. I sincerely hope they know what they are doing in Washington. This is the reason investors have a run on the equity markets.
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George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977
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