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U. S. Treasury Saves Fannie Mae and Freddie Mac

On Sunday, U.S. Secretary Harry Paulson announced that the U.S. government would be taking over Fannie Mae and Freddie Mac in order to boost the housing market and end the credit crunch, the BBC reported.

“Freddie 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 in a statement on Sunday, reported MinnPost.

Fannie Mae and Freddie Mac guarantee almost half of the current mortgages in the US, and have lost billions of dollars during the U.S. housing crash. Their collapse would have frozen mortgage lending for years, reported the BBC.

The management of the firms is going to be replaced, and the firms will be granted extra funding to propel their businesses forward.

Already, Wall Street has shown positive signs in response to the government’s actions.

With the election looming, the candidates must start to think about the way their administration is going to handle the situation with the housing market.

Democratic candidate Barack Obama realizes that while the government needs to protect the taypayers, it cannot be expected to bail out companies when things go wrong, reported MinnPost. Republican candidate John McCain also agrees that the management and investors of companies like Fannie Mae and Freddie Mac should not benefit from the federal intervention.