Friday, July 11, 2008

U.S. officials rush to reassure markets about loan agencies - International Herald Tribune: "Senior U.S. officials on Thursday sought to reassure the markets about the financial health of the nation's two largest mortgage finance companies as their stock prices plunged to their lowest level in 17 years on fears that they could face the possibility of a government bailout...The two companies play a central role in the marketplace by buying hundreds of billions of dollars in mortgages from lenders, repackaging them as securities and then either holding them in their portfolios or selling them to investors. While their stocks trade on the New York Stock Exchange, they were created by Congress to promote housing and the marketplace has long come to believe that they would be bailed out should they become insolvent. They hold a far lower level of capital than banks."
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Fannie Mae and Freddie Mac are in major trouble. If you don't think this is a big deal, read a little more about it.

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