The US government on Sunday seized control of the troubled Fannie Mae and Freddie Mac mortgage groups in what could become the world’s biggest financial bail-out.**********
Fannie and Freddie have $5,400bn in outstanding liabilities and guarantee three-quarters of all new US mortgages.
The government’s move, its most dramatic since the start of the credit crisis, is aimed at ensuring the two groups’ woes do not cripple the country’s housing market or worsen to the point that they fail and send shockwaves through global markets.
UPDATE: Just what the Doctor ordered
Shares in Europe and Asia have rallied after the US government said that it was taking over troubled mortgage giants Freddie Mac and Fannie Mae.*
London, Paris, Frankfurt and Tokyo markets all rose by more than 3%.
Banks around the world are highly exposed to the two companies and therefore, given the febrile state of markets across the world, it had become dangerous for doubts to persist about whether they were viable.