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US mortgage giants 'are insolvent'
Evening Standard 10 Jul 2008Further panic about the health of the US mortgage market surfaced today, hitting the Dow.
A leading financial figure said Fannie Mae and Freddie Mac, the giant mortgage brokers that underpin the American housing market, were insolvent and needed a government bailout.
Shares in both companies fell to levels not seen since 1991 after former Federal Reserve official William Poole's comments. The brokers are stock-market listed but governmentsponsored, implying that they would be rescued if necessary.
They work to free up the mortgage market by buying back books of home loans from banks, a strategy that has lately led to billions of liabilities as the subprime crisis hit.
Analysts say the US housing market is now in its worst shape since the Great Depression. Federal Reserve chairman Ben Bernanke, due to testify to Congress, was expected to hint that the government was poised to offer more help to banks.
The Dow was off 21.9 at 11,125.5.
