Government Gets Off Its Duff In Mortgage Crisis

September 8. 2008

Henry Paulson

The U.S. government has moved to take over lenders Fannie Mae and Freddy Mac, amid fears that international investors are worried about their investments in the American banking industry.

Last week, I wrote about the negative impact the U.S. mortgage crisis has been having on other nations, such as Britain and Germany, to name a few.

Other nations have been financially burned in the fallout from the U.S. mortgage crisis, directly due to George W. Bush’s negligence and cronyism.

It is uncertain how much of a recovery effort they can mount at this juncture, as billions in wealth has evaporated, with little left for shareholders.

It is thought this move to quell international fears, would be a symbol of the American government’s commitment to paying off international debts, so as not to further destabilize other nations’ economies.

John McCain

Time will tell if the US government will make good on this, especially if John McCain wins the election and continues comrade George W. Bush’s dreadful policies.

Mr. McCain has sided with George W. Bush on many things. If he continues Bush’s economic policies, America is in for a rough ride that it shan’t soon recover from.

Why U.S. moved on mortgage giants

September 7, 2008 - The U.S. government's planned takeover of Fannie Mae and Freddie Mac came together hurriedly after advisers poring over the companies' books for the Treasury Department concluded that Freddie's accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter.

The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies' debt might not be repaid.

Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said.

The details of the deal have not fully emerged, but it appears that investors who own the companies' common stock will be virtually wiped out; preferred shareholders, who have priority over other shareholders, may also end up with little. Holders of debt, including many foreign central banks, are expected to receive government backing. Top executives of both companies will be pushed out, according to those briefed on the plan.

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