Government Seizes Control Of Mortgage Giants

The U.S. government took control of Fannie Mae and Freddie Mac yesterday with the hope of reviving the housing and financial markets, and to arrest a vicious cycle that has driven the nation's economy into a steep downturn.  Their takeover is expected to ripple through the economy, affecting U.S. home buyers directly and indirectly, according to a New York Times article.  Investors said the provision in the bailout plan under which the Treasury would begin buying some of Fannie and Freddie’s securities would help to restore confidence.

“The fact that they’ll be able to buy mortgage-backed securities from other banks is really important,” William de Vijlder, chief investment officer at Fortis Investment Management in Brussels, said, “because it means the U.S. is serious about fixing the problems in the market.” The “doomsday scenario,” in which write-downs of those securities results in a continuing cycle of bank write-downs and losses, is over, he added.

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