Government Unveils Plan for Fannie, Freddie while IndyMac Reopens
It’s been a busy weekend for the Federal Government. It’s been taking over IndyMac and working out how to save Fannie Mae and Freddie Mac from complete insolvency.
Fannie Mae and Freddie Mac to receive bailout
One of the pieces of news that its helping the stock market, the US dollar and even Treasuries all rebound from dismal performances on Friday is the announcement, over the weekend, that Fannie Mae and Freddie Mac can count on the Federal Government. The government gave itself the power to do the following for the two embattled mortgage lenders:
- Purchase equity in the companies.
- Increase lines of credit offered to the companies.
- Make emergency loans (via the Federal Reserve) to the companies.
At the same time, though, government officials made it abundantly clear that their largess is only directed at the two government chartered mortgage lenders; no one else should expect such a bailout at taxpayer expense. (Although, you never know when this administration’s government agencies will intervene to keep big business going.)
The moves should ensure that Fannie Mae and Freddie Mac both have capital enough to keep things liquid and functioning, helping them avoid the fate of IndyMac.
IndyMac reopens today as IndyMac Federal FSB
On Friday, the government announced that it was closing down IndyMac, one of the largest mortgage lenders in the country, and taking it over. The bank is reopening today, if the firm charge of the FDIC, which hopes to find a buyer for the distressed bank. The Financial Post reports on the reason that IndyMac folded:
“IndyMac is a company that was pretty much 100% invested in mortgage assets, and we’re in a bad mortgage market, and it had no capital. It’s not complicated,” said Adam Compton, co-head of global financial stock research at RCM in San Francisco, which manages about US$150-billion.
Too bad IndyMac didn’t have the same government charter that Fannie and Freddie do.
Tags: IndyMac, Fannie Mae, home mortgage loan, Freddi Mac,
mortgage lenders, mortgage loan blog, FDIC
July 18th, 2008 at 10:26 am
[…] there would be no bail-out for Fannie Mae and Freddie Mac. Then he did an about face and announced measures to help the two companies. Constable points out that idiocy of this whole mess is that the government ordered Fannie and […]