Takeover of two largest US mortgage banks
Sunday, 13 July 2008
Fazle Rashid from New York
The US government is taking over nation's two largest beleaguered mortgage banks. Leave alone something like this taking place, even such ideas are reprehensible. The Bush administration is seriously considering the take-over of nation's two largest mortgage banks -- Fannie Mae and Freddie Mac. The two banks have already lost $11 billion. But the loss could swell further, the investors fear, The New York Times reported last Thursday.
Two banks are worst hit by the debacle in subprime lending. Fannie Mae and Freddie Mac are enormous banks and controls half of $12 trillion mortgage market. The two together grease the mortgage market. Investors around own $5.2 trillion of debt securities covered by the companies. There is real panic in the Wall Street about the state of health of these companies. Government intervention could cost tax payers in billions.
The take-over known as ' conservatorship' is not likely to heal the wounds anytime soon. The share price of these two banks are falling. The administration had earlier intervened to prevent the financial system from collapsing. The government induced JP Morgan Chase to take over Bear Stearns to avert bankruptcy in the investment house.
The very grim situation in the US economy was clearly evident from a front page picture carried by NYT. It showed treasury secretary Henry Paulson hiding his face with his hand and Fed chairman Ben Bernanke resting his chin and mouth on his left hand. Paulson and Bernanke appeared before House Financial Services Committee but refrained from saying anything adverse that could further weaken the status of the two banks. Paulson said banks are adequately captalized though they are passing through a challenging period. Both ducked a question from Democratic Representative who posed the question whether the failure of either institution would pose a risk to the financial system.
Toyota, the Japanese auto giants like its US counterparts GM, Ford and Chrysler, are shutting down two of its plants that manufactured pickups and Smart Utility Vehicle (SUV) due to drastic swing in the American automarkets. It signalled that Toyota is as vulnerable and fallible like any manufacturing units.
General Motors (GM) allayed speculations that it was seeking protection under bankruptcy law. Company's shares has dropped to the lowest level in past 50 years. The company has $23.9 billion in cash, enough to meet the present crisis Number of people drawing unemployment benefit jumped by 91,000 to 3.2 million.
The figure was 2.5 million a year ago. The total job loss so far this year has swelled to 438,000. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable
The US government is taking over nation's two largest beleaguered mortgage banks. Leave alone something like this taking place, even such ideas are reprehensible. The Bush administration is seriously considering the take-over of nation's two largest mortgage banks -- Fannie Mae and Freddie Mac. The two banks have already lost $11 billion. But the loss could swell further, the investors fear, The New York Times reported last Thursday.
Two banks are worst hit by the debacle in subprime lending. Fannie Mae and Freddie Mac are enormous banks and controls half of $12 trillion mortgage market. The two together grease the mortgage market. Investors around own $5.2 trillion of debt securities covered by the companies. There is real panic in the Wall Street about the state of health of these companies. Government intervention could cost tax payers in billions.
The take-over known as ' conservatorship' is not likely to heal the wounds anytime soon. The share price of these two banks are falling. The administration had earlier intervened to prevent the financial system from collapsing. The government induced JP Morgan Chase to take over Bear Stearns to avert bankruptcy in the investment house.
The very grim situation in the US economy was clearly evident from a front page picture carried by NYT. It showed treasury secretary Henry Paulson hiding his face with his hand and Fed chairman Ben Bernanke resting his chin and mouth on his left hand. Paulson and Bernanke appeared before House Financial Services Committee but refrained from saying anything adverse that could further weaken the status of the two banks. Paulson said banks are adequately captalized though they are passing through a challenging period. Both ducked a question from Democratic Representative who posed the question whether the failure of either institution would pose a risk to the financial system.
Toyota, the Japanese auto giants like its US counterparts GM, Ford and Chrysler, are shutting down two of its plants that manufactured pickups and Smart Utility Vehicle (SUV) due to drastic swing in the American automarkets. It signalled that Toyota is as vulnerable and fallible like any manufacturing units.
General Motors (GM) allayed speculations that it was seeking protection under bankruptcy law. Company's shares has dropped to the lowest level in past 50 years. The company has $23.9 billion in cash, enough to meet the present crisis Number of people drawing unemployment benefit jumped by 91,000 to 3.2 million.
The figure was 2.5 million a year ago. The total job loss so far this year has swelled to 438,000. The economy needs to generate more than 100,000 new jobs a month for employment to remain stable