News service Bloomberg, citing unnamed sources, reports federal regulators ordered Fannie Mae and Freddie Mac to each start buying $20 billion a month in troubled mortgage bonds.
The mortgage giants, seized last month by the government, are supposed to grab securities tied to subprime and other risky mortgages. This effort by the government to improve liquidity for home loans and shore up banks is in addition to the $700 billion bailout approved by Congress.
Read the Bloomberg story HERE.
Horrible idea. Why would they do this exactly? Oh, right, to bail out the lenders that made billions getting us into this mess.
The nationalized GSEs are now being used as taxpayer-funded garbage dumps so that the bailouts can take place at night and don’t have to go through the appropriations process.
Good decision on part of the federal government. It should ease the worries of many who are seriously concerned about the lack of confidence griping the financial markets and the consequences it will have on the economy and consumers. A decline in consumer spending will slow growth and drive the economy into recession.
Matt,
I said this would happen over a year ago. They have the infrastructure to do work outs, foreclose and sell the REO’s if necessary. I don’t agree with the decision, but I do understand that this would be better than funding a “new” gov.t entity to acomplish the same thing.
So…the GSEs were placed in conservatorship for “safety and soundness” reasons, and now the government directs them to INCREASE purchases of troubled (read RISKY) mortgage securities, with those purchases outside of the scope of the Treasury’s $700 Billion TARP? That’s another piece of evidence that conservatorship was chosen so that the government could use the GSEs as a policy tool outside of the scope of Congressional oversight, and outside of the limits of the TARP. Disgusting, and Fannie and Freddie common and preferred shareholders should be rightfully outraged, as should Congress and taxpayers.