Fed To Help Mortgage Giants
CBS
Transcript
late breaking news tonight in the federal government's effort to solve the mortgage mess treasury secretary Henry Paulson this evening announced steps to boost confidence in ailing Giants Fanny May and Freddy Mack pson says the government will expand its line of credit to the two companies and the treasury is prepared to buy equity in the companies if needed for Freddy Mack in particular time is of the essence it hopes to auction off three billion in Securities tomorrow Randall Pinkston is tracking the markets under normal circumstances Freddy mack one of the lynchpin of the nation's mortgage financing system would have little trouble selling $3 billion in Securities but these are not normal times it was last week's stomach churning stock slide that set investors on edge on Friday at one point Freddy Mack and Fanny May's stock values dropped more than 40% in the past N9 months the government sponsored Enterprises have lost 11 billion all of this in the wake of a national real estate decline triggered by the subprime mortgage crisis Freddy Mack and Fanny May guarantee or own about half the mortgages in the country I really think at the end of the day the government will step in uh the marketplace will step in uh you know the housing Market's not going to completely stop functioning in America that's just that's just not going to happen tomorrow's auction of Freddy Mack Securities will signal whether private buyers still have confidence in the system among the possible scenarios private investors will purchase the3 billion in Securities financial institutions backed by the government will buy them or failing any takers a government agency perhaps the Federal Reserve will purchase them outright bottom line Freddy Mack and Fanny May are too big to fail the mortgage Market would be in complete disarray probably for a period of about 5 years because Fanny and Freddy right now are behind about 80% of the new mortgages being granted in this country so it'd be abs abolute disaster for anybody looking to refinance their homes or else buy a new home the treasury Department's announcement today also means that in the end American taxpayers will be on the hook if if Freddy May and Fanny Mack aren't able to meet the obligations Anthony Randall why has the treasury Department made this change right now obviously to show up investor confidence they are concerned that unless the government stepped in to back their obligations that investors wouldn't provide the money that fuels this mortgage operation Randall Pinkston thanks very much