The mortgage giants Fannie Mae and Freddie Mac funded more than two-thirds of U.S. home loans. If you are reading this and you own a home, that means there is a 66% chance that Fannie or Freddie wrote a check for your home.
But like everyone else, apparently, Fannie and Freddie were funding a lot of really risky home loans. So many risky loans, in fact, that the two mortgage giants were about to collapse under their own weight. Until yesterday, that is.
As of yesterday, Fannie and Freddie are under federal control. Their CEOs and other top directors have been replaced, and the U.S. Treasury will pump up to $100 billion into the companies to keep them solvent.
In the words of one analyst, this is a “stunning use of federal power”. Time will tell whether this was a wise use of that power, or bad judgment.
For more information and in-depth analysis, check out the Washington Post’s extensive reporting on the takeover.