US moves to support lending firms
Posted by admin on 13 July, 2008 under Business news | 
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The US government has announced sweeping measures to shore up the nation’s two largest mortgage finance companies Freddie Mac and Fannie Mae.
The plan calls on Congress to expand the companies’ current line of credit and allow the Treasury to buy equity capital in the companies if needed.
Freddie Mac and Fannie Mae guarantee almost half of all US home loans.
Their share prices fell nearly 50% last week amid fears that they might have trouble raising money.
Announcing that new credit lines would be sought from Congress, Treasury Secretary Henry Paulson said: “Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owner companies.”
He added that their “support for the housing market is particularly important as we work through the current housing correction”.
The Federal Reserve also said it would lend to Fannie Mae and Freddie Mac if they need additional funds.
The two firms play an important role in the financial markets in providing funding for home loans by buying up mortgages and packaging them as investments.
As mortgage backers, the companies have had to pay out when homeowners have defaulted on their loans.
Both firms defended their finances, saying they had enough capital to weather the housing slump.
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