Bloomberg:
Paulson Aims to Do What Eluded Fed: Get Banks to Lend. “Paulson’s gamble is that government control of Fannie Mae and Freddie Mac, the two biggest purchasers of home loans, will foster a liquid market for mortgage securities that will encourage lower rates and induce banks to lend. The risk is banks will still balk because the fundamentals underlying housing have soured.” I think everyone’s so hunkered down, this won’t make a dent until housing prices and foreclosure rates stabilize.
Later: The Economist has other information, too. “Intriguingly, this will also be available to the 12 Federal Home Loan Banks. James Lockhart, the FHFA’s head, stressed that these bank-owned co-operatives, also designed to grease housing markets, are mostly in good shape. But they have a lot of short-term debt and the quality of their borrowers’ collateral is falling. Allowing them to tap the credit line may be a shrewd precautionary measure.”
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