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Fannie Mae and Freddie Mac situation

Mon, Jul 14 2008, 13:45 GMT
by Marina Schiaffino

FXstreet.com


Housing Fannie Mae and Freddie MacFirst of all, let's see who are these two guys that are creating all this buzz in the markets lately:

The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a government sponsored enterprise (GSE) of the United States federal government. It is a shareholder-owned corporation authorized to make loans and loan guarantees.

The Federal Home Loan Mortgage Corporation ("FHLMC"), commonly known as Freddie Mac, is also an US GSE. It is a stockholder-owned corporation authorized to make loans and loan guarantees. The FHLMC was created in 1970 to expand the secondary market for mortgages in the US.

And the movements come when, due to the widespread instability in the financial markets and public perceptions of looming insolvency, the Federal Reserve announces that it will allow the two biggest mortgage associations of the US, to borrow from the discount window at the primary credit rate if "should such lending prove necessary." Borrowing would be collateralized by US government and federal agency securities. The Fed noted that the move is intended to supplement the Treasury’s existing lending authority.

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Analysts' Comments

  • · Neil Mellor, analyst at the Bank of New York
    The dollar gained ground overnight in the wake of the US Treasury's dramatic announcement to inject equity and/or debt into major US lenders, Fannie Mae and Freddie Mac." - Thomson Financial News

Published on  Tue, Jul 15 2008, 10:25 GMT

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