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Article: Between the Lines: The dollars 45 trillion gamble of Fannie and Freddie bailout GeorgeKerevan
- Article from:
- The Scotsman
- Article date:
- September 10, 2008
- Author:
CopyrightCopyright 2008 The Scotsman. Provided by ProQuest LLC. (Hide copyright information)
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WELCOME to Fannie Mae's and Freddie Mac's party: the morning
after the night before. The decision by the Bush administration, in
its dying days, to nationalise the two ailing mortgage financiers
has certainly raised the animal spirits of the world's equity
markets. But the cheering could be short lived. The real question
is: which dominoes will fall next?
The instant answer appears to be the medium-sized and regional
banks in the US, which were heavy investors in the preferred stock
of Fannie Mae and Freddie Mac. While the two mortgage financiers
relied on bond sales for liquid funds (before that source dried up),
they issued preferred stock to cover their reserve capital
requirements. ...