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US government bails out Fannie Mae and Freddie Mac

The US government has bailed out the country’s two main mortgage suppliers Fannie Mae and Freddie Mac.

The US Treasury Department and Federal Housing Finance Agency has agreed to buy mortgage-backed securities from Fannie Mae and Freddie Mac.

On top of this, the Treasury has also injected as much as $200bn of new capital plus credit lines for Fannie and Freddie.

The move echoes the UK government’s nationalisation of Northern Rock in 2007.

Ben Bernanke, chairman of the Federal Reserve, has strongly endorsed the placement of Fannie Mae and Freddie Mac into what he described as a “conservatorship”.

He says: “These necessary steps will help to strengthen the US 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.”

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