America’s two biggest mortgage providers have been bailed out by the US government, sparking hope for the country’s economy and real estate market.
Fannie Mae and Freddie Mac are to be taken over by the Republican administration in the biggest financial rescue operation in American history.
Both firms finance or back nearly half of all home loans in America and ran into serious trouble during the credit crunch.
Experts now hope the takeover will aid the US housing market and ultimately the world economy as a whole.
President Bush said in a statement:
“Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth.”
American shares reacted positively to the announcement, delivered on Sunday.
Rumours of a government rescue were fuelled by a July announcement that the treasury would supply cash to prop up both firms.
Shares in both organisations then slumped in August, further pressuring the administration to intervene.
US Treasury secretary Henry Poulsen said both companies were “so large and so interwoven” into America’s financial infrastructure that their failure would have caused “turmoil” in worldwide markets.
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