Fannie Mae and Freddie Mac Placed under Conservadorship
by Al Jazeera Monday Sept 8 2008
The US government has placed mortgage lenders Fannie Mae and Freddie Mac under its supervision in an attempt to help them recover from massive losses, officials said.
The move on Sunday means that the mortgage giants, which are federally chartered but shareholder owned, are effectively under bankruptcy reorganisation.
But some analysts said a government bail out of Fannie and Freddie could alarm investors concerned at the scale of government intervention.
The executives were told that, under the plan, they and their boards would be replaced and shareholders would be virtually wiped out....
Under a conservatorship, the common and preferred shares of Fannie and Freddie would be reduced to little or nothing, and any losses on mortgages they own or guarantee could be paid by taxpayers. Shareholders have already lost billions of dollars as the stocks have plunged more than 80 percent this year.
The executives were told that the government had been planning to announce the decision as early as Sunday, before the Asian markets reopen, the officials said.
Spokesmen at the two companies did not return telephone calls seeking comment.
Abridged from the NY Times for E.A. =>>
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