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White House
11 July 2008
The U.S. government says it will not take charge of the nation's two largest mortgage finance firms as their stock prices plunge in further signs of trouble for America's housing market. VOA White House Correspondent Scott Stearns has the story.
U.S. Treasury Secretary Henry Paulson says the federal government's primary focus is supporting the mortgage finance companies in their current form.
For now, the written statement appears to rule out a government take over of Fannie Mae and Freddie Mac, which own or guarantee about $5 trillion worth of mortgages, more than half of the U.S. mortgage market.
Those firms have lost billions of dollars in the continuing decline of the U.S. housing market with record loan defaults and foreclosures.
Shares in the companies' stocks have lost close to 90 percent of their value in the last year. Investors are worried that Fannie Mae and Freddie Mac will lose more money and will have to borrow more to cover those losses.
Secretary Paulson said the Treasury is maintaining a dialogue with regulators and the companies as they take steps necessary to allow them to continue to perform what he called their important mission.
Congress created the firms to make mortgage loans more available to more Americans by buying up mortgages from banks, bundling them together, and reselling them to investors around the world.
If Fannie Mae or Freddie Mac were unable to raise additional capital, they might be unable to buy mortgages from lenders, making it much harder for people to get home loans
The federal government does not guarantee their debts, but most investors believe Washington would not allow the firms to collapse, especially in a weak economy.
Speaking to reporters after a meeting with his top economic advisors, U.S. President George Bush said Paulson and Federal Reserve Chairman Ben Bernanke will be working the issue of the mortgage giants very hard.
"Freddie Mac and Fannie Mae are very important institutions," he said. "We spent a fair amount of time discussing these institutions."
At a time of record high gasoline prices, President Bush again called on Democrats in Congress to expand offshore oil drilling and allow for drilling in an Alaskan wildlife refuge.
"These are tough economic times for American citizens," he added. "There is a way forward to help relieve some of the pressure on their pocketbooks, and I am looking forward to watching this Congress respond in a positive way."
Paulson's announcement sent U.S. stocks on a downward spiral Friday. The Dow industrials fell below the 11,000 level for the first time since August 2006, as oil topped a record $147 a barrel. Analysts say prices are up because of violence in Nigeria, a possible strike in Brazil, and continuing tensions between Israel and Iran.
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