As YWN posted on Motzei Shabbos, the takeover by the US Government of “Freddi & Fannie” was predicted as imminent. The reports were in fact true, as confirmed by a press conference announcing the major news on Sunday morning. Saying that market conditions have made it impossible for the nation’s top mortgage lenders to sustain its loans, the Treasury Department announced that the government is seizing Fannie Mae and Freddie Mac.

Statement by the US Federal Reserve:
The federal banking agencies have been assessing the exposures of banks and thrifts to Fannie Mae and Freddie Mac.  The agencies believe that, while many institutions hold common or preferred shares of these two government-sponsored enterprises, a limited number of smaller institutions have holdings that are significant compared to their capital.

The Federal Reserve Board, the Federal Deposit Insurance Corporation, the Office of the Comptroller of the Currency, and the Office of Thrift Supervision are prepared to work with these institutions to develop capital-restoration plans pursuant to the capital regulations and the prompt corrective action provisions of the Federal Deposit Insurance Corporation Improvement Act.

All institutions are reminded that investments in preferred stock and common stock with readily determinable fair value should be reported as available-for-sale equity security holdings, and that any net unrealized losses on these securities are deducted from regulatory capital.

The following Statement by Federal Reserve Board Chairman Ben S. Bernanke was issued a few moments ago:

“I strongly endorse both the decision by FHFA Director Lockhart to place Fannie Mae and Freddie Mac into conservatorship and the actions taken by Treasury Secretary Paulson to ensure the financial soundness of those two companies.  These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets.  I also welcome the introduction of the Treasury’s new purchase facility for mortgage-backed securities, which will provide critical support for mortgage markets in this period of unusual credit-market uncertainty.”

(Yehuda Drudgestein – YWN)