The Feds pulled the plug on Freddie Mac and Fannie Mae Sunday taking operational control out of the hands of managers and into the hands of the Federal Government.
The companies that were to big to fail have failed. Now the government will keep them going as a public concern.
“Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe,” Paulson said. “This turmoil would directly and negatively impact household wealth: from family budgets, to home values, to savings for college and retirement. A failure would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance. And a failure would be harmful to economic growth and job creation.”
Paulson refused to say how much capital the government might eventually have to provide, or what the ultimate cost to taxpayers might be.
The companies are likely to need tens of billions of dollars over the next year, but the ultimate cost to taxpayers will largely depend on how and how fast the housing and mortgage markets recover from the current crisis.
U.S. announces takeover of Fannie and Freddie – International Herald Tribune.
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So much for being too big to fail. I think it had to happen though.
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