Government Bails Out Fannie Mae and Freddie Mac

closely following the government bailout of Fannie Mae and Freddie Mac. In taking over the two mortgage giants, the U.S. government is taking responsibility for the two firms, which provide funding for around three-quarters of new home mortgages.
James Hagerty, Ruth Simon and Damian Paletta examine the takeover and how it enables the Treasury to acquire $1 billion of preferred shares in each company and has pledged to provide as much as $200 billion to help the two companies deal with heavy losses on their mortgage defaults. All of this action could mean a greater burden placed on American taxpayers.
The bailout has also led to activity on the stock market this morning as investors hope the government’s actions will help bring the Wall Street credit crisis to an end, as Peter McKay reports. He adds that dangers do remain for stock investors, including the spread of job losses and slowing growth overseas, as well as the low prices of homes in the U.S. combined with high unsold inventory.
Heidi Moore examines the winners and losers of the bailout on the Deal Journal blog. Among the winners, she writes, are homeowners, Hank Paulson and Republicans, while lobbyists, Congress and management make the list of losers.
Presidential candidates Barack Obama and John McCain have both agreed that it is certainly time for government action on Fannie Mae and Freddie Mac, as Moore writes in a separate piece. Both candidates agree that the two mortgage companies are not properly structured. Obama expressed that he had “no sympathy” for the now-ousted CEOs of Fannie and Freddie, while McCain said he would “[make] them go away” if he is elected....more