The heads of the United States,US, Federal Reserve and Treasury have moved to calm fears about the financial health of the nation’s two largest mortgage firms. Shares in Fannie Mae and Freddie Mac recorded another poor trading in recent weeks amid talk of a government ball-out.
Ben Bernanke, head of the reserve, and Henry Paulson, the Treasury secretary, also called for new powers to shield the economy from crises and told the US Congress they needed to modernise the regulatory system.
They told a hearing of the House Financial Services Committee t5hat Fannie Mae Freddie Mac had aqdequate capital. Investors fear the two mortgage firms may need a government bail-out, after comments from a former central banker that suggested the institutions might6 not be solvent. Both firms are raising funds to cover losses of more than $11 billion (5.6 billion pounds) since the credit crisis began last year. ” Fannie Mae and Freddie Mac are also working through this challenging period.They play an important role in our housing markets today and need to continue to play an important role in the future. Their regulator has made it clear that they are adequately capitalised,” Paulson said.
Freddie Mac shares slid 22 per cent to $8 aqnd Fnnie Mae lost 13,8 per cent to $13.20, but Bernanke said that while current efforts were being concentrated on steadying the state of the US economy, it was not too early to consider measures to ensure the ” orderly” liquidation of finance firms on the verge of bankrupcy in the future.