Who knew the Treasury Department had such deep pockets? Well, besides all of Wall Street, we can put the beleaguered duo that is Fannie Mae and Freddie Mac on the list. The Treasury has obligingly removed the $400 billion cap previously assigned to the funding designated to save the two mortgage firms. —KA
The Treasury Department said Thursday it removed the $400 billion financial cap it will provide to keep the companies from failing. Already, taxpayers have shelled out $111 billion to the pair.
Treasury Department officials said the $400 billion limit would be replaced with a flexible formula to ensure the two agencies can stand behind the billions of dollars in mortgage-backed securities they sell to investors.
Fannie Mae and Freddie Mac provide vital liquidity to the mortgage industry by purchasing home loans from lenders and selling them to investors. Together, they own or guarantee almost 31 million home loans worth about $5.5 trillion, or about half of all mortgages.
Without government aid, the firms would have gone broke, leaving millions of people unable to get a mortgage.