US would never be affordable to the crash down of Fannie Mae and Freddie Mac, so they would never be abandoned.
By Francesco Guerrera in New York and James Politi and Krishna Guha in Washington
US policymakers held crisis talks yesterday over possible moves to bolster Fannie Mae and Freddie Mac, amid mounting fears that failure to shore up the troubled mortgage groups could send markets plummeting this morning.
Officials said Treasury secretary Hank Paulson, Federal Reserve chairman Ben Bernanke and Tim Geithner, president of the New York Fed, were leading the talks.
A statement on Fannie and Freddie, which are sponsored by the government but owned by shareholders, could come before the opening of Asian markets, they added.
A person close to the situation said a “shared agreement on a path forward” for the two companies had been reached. Another official cautioned that the situation remained fluid and that it was possible no major policy initiative would be announced.
The crisis of confidence engulfing Fannie and Freddie, which guarantee more than $5,300bn in US mortgages, is threatening to deepen the financial turmoil and further undermine investors' fragile confidence in the stability of global capital markets.
The Securities and Exchange Commission underlined regulators' heightened state of alert by taking the unusual step of choosing a Sunday to announce a crackdown on the spreading of false market rumours.
The move comes after weeks in which shares in several financial firms – including Lehman Brothers and a number of commercial banks – have been targeted by a flurry of rumours over their financial health.
Lehman and others denied those rumours but that did little to prevent a sharp sell-off in their stocks.
Shares in Fannie and Freddie have collapsed over the past few months amid growing concerns over their ability to withstand losses on their huge portfolios of mortgages.
In a major test of the market sentiment towards the two companies, Freddie is due to sell $3bn in short-term debt today.
