Fannie Mae, Freddie Mac Under Federal Control

In a move that is intended to keep the mortgage market from collapsing, on September 7^th, 2008 the Federal Government took control of the Fannie Mae and Freddie Mac mortgage companies. Under the powers of the newly formed Federal Housing Finance Agency, which was a merger of the Federal Housing Finance Board and the Office of Federal Housing Enterprise Oversight agencies as a result of the Housing and Economic Recovery Act of 2008 (click here for more), Fannie Mae and Freddie Mac have been placed into a conservatorship.

A conservatorship is simply the state of a person or other entity, such as the Fannie Mae and Freddie Mac mortgage institutions, being placed under legal protection.

Because the Fannie Mae and Freddie Mac mortgage institutions are government sponsored enterprises, it made sense for the Federal Government to take the companies into legal protection and protect the government's interests. You can read more about government sponsored enterprises, such as Fannie Mae and Freddie Mac at Wikipedia.com or you can just click here.

In August, Alan Zibel, an Associated Press business writer, reported that Freddie Mac and Fannie Mae had seen severe drops in stock share prices. Investors of Fannie Mae and Freddie Mac at first were relieved at the news of a proposed government bail-out loan for the companies, but due to an anonymous Bush administration source feared that government intervention might not prove successful. Alan's report can be read at Usatoday.com or you can just click here.

In response to the August stock plummets, Fannie Mae announced a managerial shake-up that saw the replacement of the company's chief financial officer. Fannie Mae also gave the chief business officer an expanded role while appointing a chief risk officer. Details of the Freddie Mac and Fannie Mae stock crises can be found at Cnbc.com or click here. Unfortunately the managerial change was not enough to bring Fannie Mae back from financial losses.

Throughout the year, Freddie Mac attempted to lift investor's fears by first assuring them that there was no intention to sell more stock, which would dilute current Freddie Mac stocks. However, as the year progressed and Freddie Mac showed no signs emerging from financial duress, the company did begin selling stock. More information about the Freddie Mac stock sale can be found at Washingtonpost.com or just click here.

There is much debate concerning the government "takeover" of Fannie Mae and Freddie Mac. Some people believe that the Government of the United States of America has shown little ability to manage itself let alone Fannie Mae or Freddie Mac. Others believe that the conservatorship of Freddie Mac and Fannie Mae will help the country's mortgage crisis significantly.