US Treasury to spend billions in bailout of Freddie Mac and Fannie Mae

The US Government took dramatic steps to prop up America’s financial system last night, announcing that it was prepared to pump billions of dollars into the country’s mortgage market in a desperate measure to prevent the economy going into a tailspin.

Tom Bawden in New York and Gerard Baker in Washington, TimesOnLine - 14 July 2008

In a late-night announcement designed to calm increasing panic on Wall Street before today’s market opening, the US Treasury Department and the Federal Reserve issued a joint statement in which they pledged to spend billions of dollars of taxpayers’ money to bail out the two American mortgage giants that collectively underpin the entire housing market “if needed”.

The Fed said it would offer cheap financing to the giants, Freddie Mac and Fannie Mae, through its so-called discount window. The Treasury separately said that it would propose to Congress that lines of credit to the two should be extended temporarily. Furthermore, Henry Paulson, the US Treasury Secretary, said that the Treasury would purchase equity in both organisations if needed - full article