What is the federal takeover of Fannie Mae and Freddie Mac?
In September of 2008, the Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) were placed into conservatorship of government sponsored enterprises, by the US Treasury. This event took place during the then ongoing subprime mortgage crisis.
Where have you heard about the federal takeover of Fannie Mae and Freddie Mac?
The decision was announced on September 6th 2008 by James B Lockhart, the director of the Federal Housing Finance Agency, and received support from, amongst others, United States Treasury Henry Paulson and the chairman of the federal reserve bank Ben Bernanke.
What you need to know about the federal takeover of Fannie Mae and Freddie Mac.
There were obviously market consequences to this advancement. Many commercial banks in the United States were owners of Freddie and Fannie preferred shares. Those shares experienced suspended dividends, causing a drastic drop in their market value. One of the effects that Fannie and Freddie had on the subprime mortgage crisis was the improvement of liquidity in the mortgage market, due to banks being assured that Fannie and Freddie had enough funds to buy conforming loans. Home prices also became more stable, meaning mortgage backed securities received a little more positive backing.
Find out more about the federal takeover of Fannie Mae and Freddie Mac.
To learn more about the federal takeover of Fannie Mae and Freddie Mac, read about financial crisis.
A loan is money lent to you so that you can buy something, for example a car, a house or a...
Mortgage-Backed Securities (MBS)
Also known as MBS, they're fixed-income investments backed by a pool of mortgages. When a...
Financial crisis of 2007–2008
This was one of the worst economic disasters in history. The signs that all was not well...