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Bush: Takeover of Freddie, Fannie was necessary
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WASHINGTON (AP) --
President Bush said Sunday that the historic federal government
takeover of mortgage giants Fannie Mae and Freddie Mac is needed to
keep them from failing, a risk he called "unacceptable" for an
economy battered by housing and credit crises.
"Allowing the
companies to fail or further deteriorate would damage our home
mortgage market, and could weaken other credit markets that are
unrelated directly to housing," Bush said in a statement released
Sunday afternoon. "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."
The Bush
administration announced Sunday it was taking control of the two
institutions to avert the potential for major financial
turmoil.
The companies, which
together own or guarantee about $5 trillion in home loans, about
half the nation's total, have lost $14 billion in the last year and
are likely to pile up billions more in losses until the housing
market begins to recover.
Both companies were
placed into a government conservatorship that will be run by the
Federal Housing Finance Agency, the new agency created by Congress
this summer to regulate Fannie and Freddie. The executives and
board of directors of both institutions are being
replaced.
In a statement, the
president called the moves temporary until the appropriate role for
the companies can be determined.
He said they must be
reformed so that "they not pose similar risks to our economy or the
financial system again."
Treasury Secretary
Henry Paulson said the actions were being taken because the failure
of either of the mortgage companies "would cause great turmoil in
our financial markets here at home and around the globe." The huge
potential liabilities facing each company could cost taxpayers tens
of billions of dollars. But Paulson stressed that the financial
impacts if the two companies had been allowed to fail would be far
more serious.
Bush said the federal
regulator for Fannie Mae and Freddie Mac determined they could no
longer operate safely and conduct their public
mission.
He said that posed "an
unacceptable risk to the broader financial system and our
economy."
Posted in News on Sunday, September 7, 2008 12:00 am
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