Rescuing Fannie And Freddie Temporary Solution For British Mortgage Market

Rescuing Fannie and Freddie is a temporary solution for British mortgage market

US Treasury Secretary, Henry Paulson’s decision to take rescue manage UK giants Fannie (Federal National Mortgage Association) and Freddie (Federal Home Loan Mortgage Corporation) would offer little respite to homeowners of Britain. Even though the industrial average of Dow Jones moved up by 129 points this strategy of the US Government will not be a quick fix solution for the ailing Mortgage market of Britain.

In Britain too shares in house builders and fund managers soared. Barclays was the most profitable among banks with share prices increasing by 12 per cent to 355p while share prices of Cattles climbed to 125 p up by 13.6 per cent. ?

In spite of these figures, experts feel that there would hardly be any sudden results coming from the takeover of two British giants though stability of the American housing market would have an incidental benefit for Britain. As a result of the stability, consumers would get time to value their property with more knowledge. The housing market would get a boost as banks would henceforth be more comfortable in lending individuals equipped with a better understanding of the credit assets. This operation by Henry Paulson is expected to benefit American lenders. Analysts have calculated that European financial companies have less hold on shares by Fannie and Freddie and therefore they would only be partially hit by the fall. However, these companies hold about $72 billion of Fannie Mae and Freddie Mac debt and mortgage-backed securities and many banks like Credit Suisse, Deutsche Bank and UBS do not divulge the exact details. A senior research analyst feels that the bailing out of the British companies would hardly help in improving the economic problems that Britain is currently reeling under. It does not do much for the self-created problems of the UK economy and therefore the banks of UK. The prices of houses are going to fall further with bank losses.

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