US Government seizes control of mortgage giants Fannie Mae and Freddie Mac

WASHINGTON (AP) âÄî The Bush administration seized control Sunday of troubled mortgage giants Fannie Mae and Freddie Mac, aiming to stabilize the housing market turmoil that is threatening financial markets and the overall economy. Treasury Secretary Henry Paulson is betting that providing fresh capital to the two firms will eventually lead to lower mortgage rates, spur homebuying demand and slow the plunge in home prices that has ravaged many areas of the country. The huge potential liabilities facing each company, as a result of soaring mortgage defaults, could cost taxpayers tens of billions of dollars, but Paulson stressed that the financial impacts if the two companies had been allowed to fail would be far more serious. “A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance,” Paulson said. But more importantly, “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe,” he added in a televised announcement.