By Bill Van Auken
8 September 2008
In the biggest government intervention in the American economy since the Great Depression of the 1930s, the US Treasury Department announced Sunday that it is effectively nationalizing the two mortgage giants Fannie Mae and Freddie Mac.
Timed to precede the opening of the stock markets in Asia, the announcement that the two firms are being placed in “conservatorship” left no doubt about the depth of the economic crisis confronting American and world capitalism.
“Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe,” said Treasury Secretary Henry Paulson Jr., at a Washington press conference. “A failure would be harmful to economic growth and job creation. That is why we have taken these actions today.”
US takes over mortgage giants
It’s one of the biggest financial bail outs in the history of the United States and its impact is being felt around the world.
The US Federal Government has taken over the mortgage giants Freddie Mac and Fannie Mae. The two acccount for nearly half of all the outstanding mortgages in the US.
Together they own or guarantee mortgages worth more than $5 trillion – almost the equivalent of Japan’s GDP.
And the threat to them is very real because of the housing market collapse. One in ten Americans is behind on payments or faces repossession and both companies are losing billions.
John Terret takes a look at the details of the bailout plan.