Saudi Ministry of Education to showcase innovations at 2025 Geneva International Exhibition    7,523 violators of residency, labor, and border security laws deported in a week    Video contradicts Israeli army account of deadly March 23 strike on Gaza paramedics    Saudi Arabia spends over $241 million to implement de-mining projects in 3 countries    Italy's Meloni government approves controversial security decree expanding police protections and penalties    Egypt submits new Gaza ceasefire and prisoner exchange proposal: Report    'Everything is possible' — Ronaldo focused on titles, not 1,000-goal milestone after Riyadh Derby win    Saudi, US military leaders discuss enhanced defense cooperation in Riyadh    King Salman Global Academy for Arabic Language launches program with Indiana University    Ronaldo brace powers Al Nassr past Al Hilal in Riyadh derby thriller    Ed Sheeran weaves Persian music into new song, Azizam    Al-Jadaan: Crown Prince's directives confirm government's ability to bring back balance to real estate market    Veteran Bollywood actor Manoj Kumar dies at 87    Foreign investors are allowed to engage in real estate business outside Makkah and Madinah Commercial speculation should not be the purpose of real estate transaction    Aubameyang fires Al Qadsiah into King's Cup final with stoppage-time winner over Al Raed    Musk's X is suing India, as Tesla and Starlink plan entry    Tesla sales plunge after backlash against Elon Musk    Danilo Pereira fires Al Ittihad into King's Cup final with dramatic stoppage-time double    Screen time in bed linked to insomnia, study finds    Mexico bans junk food in schools to fight childhood obesity epidemic    Sweet sales surge ahead of Eid as Saudi chocolate imports top 123 million kg in 2024    Bollywood actress vindicated over boyfriend's death after media hounding    Grand Mufti rules against posting prayers and preaching in mosques on social media    King Salman prays for peace and stability for Palestinians in Ramadan message King reaffirms Saudi Arabia's commitment to serving the Two Holy Mosques and pilgrims    Exotic Taif Roses Simulation Performed at Taif Rose Festival    Asian shares mixed Tuesday    Weather Forecast for Tuesday    Saudi Tourism Authority Participates in Arabian Travel Market Exhibition in Dubai    Minister of Industry Announces 50 Investment Opportunities Worth over SAR 96 Billion in Machinery, Equipment Sector    HRH Crown Prince Offers Condolences to Crown Prince of Kuwait on Death of Sheikh Fawaz Salman Abdullah Al-Ali Al-Malek Al-Sabah    HRH Crown Prince Congratulates Santiago Peña on Winning Presidential Election in Paraguay    SDAIA Launches 1st Phase of 'Elevate Program' to Train 1,000 Women on Data, AI    41 Saudi Citizens and 171 Others from Brotherly and Friendly Countries Arrive in Saudi Arabia from Sudan    Saudi Arabia Hosts 1st Meeting of Arab Authorities Controlling Medicines    General Directorate of Narcotics Control Foils Attempt to Smuggle over 5 Million Amphetamine Pills    NAVI Javelins Crowned as Champions of Women's Counter-Strike: Global Offensive (CS:GO) Competitions    Saudi Karate Team Wins Four Medals in World Youth League Championship    Third Edition of FIFA Forward Program Kicks off in Riyadh    Evacuated from Sudan, 187 Nationals from Several Countries Arrive in Jeddah    SPA Documents Thajjud Prayer at Prophet's Mosque in Madinah    SFDA Recommends to Test Blood Sugar at Home Two or Three Hours after Meals    SFDA Offers Various Recommendations for Safe Food Frying    SFDA Provides Five Tips for Using Home Blood Pressure Monitor    SFDA: Instant Soup Contains Large Amounts of Salt    Mawani: New shipping service to connect Jubail Commercial Port to 11 global ports    Custodian of the Two Holy Mosques Delivers Speech to Pilgrims, Citizens, Residents and Muslims around the World    Sheikh Al-Issa in Arafah's Sermon: Allaah Blessed You by Making It Easy for You to Carry out This Obligation. Thus, Ensure Following the Guidance of Your Prophet    Custodian of the Two Holy Mosques addresses citizens and all Muslims on the occasion of the Holy month of Ramadan    







Thank you for reporting!
This image will be automatically disabled when it gets reported by several people.



Govt takes big role in US mortgage market
Published in The Saudi Gazette on 09 - 09 - 2008

The government has just become one of the biggest players in the US mortgage market.
The Bush administration announced Sunday it was seizing troubled mortgage giants Fannie Mae and Freddie Mac in a bid to help reverse a prolonged housing and credit crisis.
But private analysts worried that it may not be enough to stabilize the slumping housing market given the glut of vacant homes for sale, rising foreclosures, rising unemployment and weak consumer confidence.
Mark Zandi, chief economist at Moody's Economy.com predicted that 30-year mortgage rates, currently averaging 6.35 percent nationwide, could dip to close to 5.5 percent.
That's because investors will be more willing to buy the debt issued by Fannie and Freddie - and at lower rates - since the federal government is now explicitly standing behind that debt.
“Effectively, the federal government has now become the nation's mortgage lender,” he said. “This takes a major financial threat off the table.” Officials announced that both Fannie Mae and Freddie Mac were being placed in a government conservatorship, a move that could end up costing taxpayers billions of dollars.
Treasury Secretary Henry Paulson refused to estimate how much the takeover of the two companies will cost the government, but he insisted that taxpayers will get paid back first.
“We structured this facility to protect the taxpayer,” Paulson said Monday in an interview on the CBS Early Show.
“The government will be repaid ... before the shareholders of these companies get a penny.” In a separate appearance on CNBC, Paulson said “we obviously don't know” when asked how much the takeover could end up costing taxpayers. He said that will depend on how quickly the housing market turns around.
Wall Street posted a huge rally Monday as investors reacted with enthusiasm to the government's actions. The Dow Jones industrial average was up nearly 250 points in late morning trading. Foreign investors own about $1.5 trillion of the debt issued by Fannie, Freddie and smaller agencies such as Ginnie Mae last year and are likely to pile up billions more in losses until the housing market begins to recover.
The Treasury Department said it was prepared to put up as much as $100 billion over time in each of the companies if needed to keep them from going broke, in exchange for senior preferred stock. Treasury will immediately be issued $1 billion of such stock from each company, which will pay 10 percent interest.
Further purchases of preferred stock will be triggered if quarterly audits find that the companies' capital cushion is below prudent standards.
The government, which will receive warrants representing ownership stakes of 79.9 percent in each company, is hoping that its moves will reassure nervous investors that they can continue to buy the debt of the two companies.
In a statement, President George W. Bush said, “Americans should be confident that the actions taken today will strengthen our ability to weather the housing correction and are critical to returning the economy to stronger sustained growth.” The conservatorship will be run by the Federal Housing Finance Agency, the new agency created by Congress this summer to regulate Fannie and Freddie, a move taken at the same time that Congress greatly expanded the power of the Treasury Department to make loans to the two companies and purchase their stock.
The executives and board of directors of both institutions are being replaced. Herb Allison, the former head of the TIAA-CREF retirement investment fund, was selected to head Fannie Mae, and David Moffett, a former vice chairman of US Bancorp, was picked to head Freddie Mac.
Paulson was careful not to blame Daniel Mudd, the outgoing CEO of Fannie Mae, or Freddie Mac's departing CEO, Richard Syron, for the companies' current problems. While both men are being removed as the top executives, they have been asked to remain for an unspecified period to help with the transition.
Fannie and Freddie both purchase home loans from banks and then repackage those loans as mortgage-backed securities that they either hold on their own books or sell to investors around the globe.


Clic here to read the story from its source.