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Bullish for dollar, stocks and real estate Fed opens up its lending window and bigger line of credit with Treasury for Fannie Mae and Freddie Mac
What I told you yesterday in my article yesterday Can dollar hold its base with Fannie, Freddie fiasco? came true today as the Fed did exactly what I said will happen.
The Treasury Department and Federal Reserve on Sunday outlined a comprehensive government plan to prop up Fannie Mae and Freddie Mac - the two mortgage finance giants that play a crucial role in the U.S. economy.
Treasury Secretary Henry Paulson said the Bush administration plans to ask Congress to enact legislation to temporarily increase the line of credit that the companies have with the Treasury. It would also allow the Treasury to buy stock in the companies.
As motioned in Indiadaily repeatedly over the last two weeks, the Fannie Mae and Freddie Mac will not go insolvent now. It will in later part of 2012 when the Federal Government will finally give up supporting these two black holes in the debt galaxy after tripling the budget deficit.
Federal Reserve announced Sunday that the mortgage finance companies can turn to the Federal Reserve Bank of New York for funds. The move gives Fannie and Freddie the same access to the funds as commercial banks and Wall Street firms. The agency granted investment banks such access earlier this year in the wake of a similar crisis of confidence when investors lost faith in Bear Stearns.
The decision by the government to step in come at a tumultuous time for the two shareholder-owned companies, which own or back $5 trillion in home mortgages and are counted on to play a central role in the recovery of the battered housing market.
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