Confirming that the Mortgage Crises is far from over, Federal officials unveiled an extraordinary takeover on Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, signaling the most dramatic move to date aimed at shoring up the nation's housing market - CNN Money
Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing. "We examined all options available, and determined that this comprehensive and complementary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said. "The move is intended to prevent major financial turmoil. Our economy and our markets will not recover until the bulk of this housing correction is behind us. Fannie Mae and Freddie Mac are critical to turning the corner on housing."
Fannie and Freddie's loans will be managed by the Federal Housing Finance Agency.
Fannie's stock price has fallen about 66% since the end of June 2008 and Freddie has fallen about 69% in the same period. Chief Executives of Fannie and Freddie, Richard Syron and Daniel Mudd have been ousted as part of the takeover.
To highlight how drastic the deterioration of these companies really is, take a look at their capital: Fannie had $47 billion at June 30, according to company filings (They are required to hold $37.5 billion). Freddie's capital stood at $37.1 billion (compared with a requirement of $34.5 billion). Fannie's market capitalization is now $7.6 billion - down from $38.9 billion at the end of last year while Freddie's has fallen to $3.3 billion, down from $22 billion over the same period.
Fannie and Freddie own or guarantee almost half of the $12 trillion in U.S. home loans and the government had been leaning on the companies to help pull the economy out of the housing crisis.