The decision to take over Fannie Mae and Freddie Mac signals an unprecedented intervention in U.S. financial markets. The move, by a conservative administration no less, is an indication of the concern surrounding the two mortgage companies and the impact of continuing uncertainty on global financial markets.
The United States is to be commended for the speed with which it has stabilized the two lending giants, but this move will not end the crisis that threatens markets. More action is required.
The Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation, known as Fannie Mae and Freddie Mac, respectively, are privately owned, government-sponsored entities that support the U.S. housing market by purchasing mortgage loans from banks that originate them, providing those banks with cash to make yet more loans. They package the loans into securities that they keep or sell around the world.