Fannie Mae & Freddie Mac

Who are Fannie Mae & Freddie Mac? Well the Federal National Mortgage Association (Fannie Mae) and the Federal Home Mortgage Corporation (Freddie Mac) have operated since 1968 as government sponsored enterprises. This means that, although the two companies are privately owned and operated by shareholders, they are protected financially by the support of the Federal Government. 
What's new with Fannie and Freddie? Well they have been on the brink of collapse. Former Treasury Secretary John Snow has been trying to convince many people that the government would never let Fannie and Freddie fail. Well Snow was right, President Bush's administration came out late Sunday to guarantee solvency for the companies that buy/finance nearly half of the $12-trillion of the U.S. mortgages.  President Bush's administration's statement is astounding since it has spend nearly 8 years trying to lessen the government's role in the economy.

Fannie Mae and Freddie Mac stock stopped falling yesterday after a rescue plan was announced by Treasury Secretary Henry Paulson. His plan included a pledge to seek congressional approval to buy the companies stock. Mr. Snow liked the plan and stated that the move was necessary to avert a worse global financial crisis. Mr. Snow added that the Bush administration's decision will leave the housing industry ordered by the visible hand of the government instead of invisible forces of the housing market.

In laymen's terms Fannie Mae and Freddie Mac are being nationalized. They will now be in full control of the U.S. government.  On the upside, Freddie Mac has received above average demands for $3 billion short-term notes, which means people are expecting the government to back the debt.

Overall, Fannie Mae and Freddie Mac are here to stay... at least for now.