Fannie Mae (FNM) and Freddie Mac (FRE) collapsed again following the suggestion from former St. Louis Fed President William Poole that the two mortgage-lenders may require a government bailout to remain solvent. The government-sponsored lenders guarantee about half of the $12 trillion in mortgage loans in the U.S., and regulators and lawmakers were quick to offer assurances that FNM and FRE would not be allowed to fail.
John McCain said that Fannie and Freddie “must not fail,” and that the lenders “are vital to Americans’ ability to own their own homes.” Democratic senator Charles Schumer insisted that “Markets should be assured that the federal government will stand by Fannie Mae and Freddie Mac. They are too important to go under.”
Treasury Secretary Hank Paulson said that the lenders are “playing a very important and vital role right now,” and insisted that they “need to continue to play an important role in the future.” Fed Chairman Ben Bernanke said only that the two companies need “to expand their capital bases so that they can be even more proactive in providing credit and support for the economy.”
As the housing market (and the economy in general) continues its slow motion train wreck, and with election year politics only beginning to heat up, its a safe bet that bailouts are coming.
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