WHAT ABOUT FANNIE MAE & FREDDIE MAC? 1
Gross Domestic Product grew 1.0% in the 1st quarter of 2008 versus only 0.6% in the 4th quarter of 2007. Profits of financial corporations increased by $ 14. billion against a $74.4 billion decrease in the preceding quarter –indicating some recovery from the subprime crisis. Overall corporate profits decreased by only $5.2 billion in the 1st quarter of 2008 versus a $ 52.9 billion decrease in the 4th quarter of 2007.
Despite this apparent trend of an economy climbing out of the hole, the failure of IndyMac has revived the spectre of subprime and sent ripples through the financial sector. Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation) –(both government sponsored enterprises (GSEs) hold $5 trillion mortgage assets and were one of the biggest casualties of the subprime crisis. Together, they have lost more than $11 billion.
Fannie Mae provides financial products and services that make it possible for low, moderate, and middle income families to buy homes of their own. Freddie Mac is chartered by Congress to increase the supply of money that mortgage lenders can make available to homebuyers and multifamily investors.
Will the US government be able to shore up Fannie Mae & Freddie Mac?
info from http://www.ofheo.gov/newsroom.aspx and http://www.bea.gov/newsreleases/national/pi/pinewsrelease.htm
image from Microsoft Clipart
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POSTED IN: Accounting Concepts, Accounting for NonAccountants, Personal / Household Finance
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