WASHINGTON, September 7, 2008 (AFP) – The US government took over ailing mortgage giants Fannie Mae and Freddie Mac on Sunday and placed them in a “conservatorship” in a bid to avert a financial system meltdown from the housing crisis.
Treasury Secretary Henry Paulson announced the US regulator was seizing control of the government-chartered, shareholder-owned firms which underpin trillions of dollars of home loans and a have an enormous global financial footprint.
The move constitutes a massive government intervention to contain the damage from the worst housing slump in decades, which has rippled through the banking system and led to multibillion-dollar losses for Fannie and Freddie.
“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 in the future,” President George W. Bush said in a statement.
He stressed that the move was a temporary, “near term” intervention, but said a financial system meltdown from the potential failure of Freddie Mac and Fannie Mae posed “an unacceptable risk” to the US economy.
Paulson said the plan “is the best means of protecting our markets an