Bernanke: Fannie, Freddie In No Danger
Amid Fading Confidence In Financial System, Fed Chair Says He Faces "Significant Challenges"
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Federal Reserve Chairman Ben Bernanke says Fannie Mae and Freddie Mac are in no danger of collapse. (AP Photo/Susan Walsh)
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Play CBS Video Video Freddie, Fannie And Friends With trouble brewing inside mortgage giants Freddie Mac and Fannie Mae, Armen Keteyian reports that the nation is learning more and more about the companies and their friends in high places.
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Video Notebook: Fall Of The Giants "Only On The Web": The Federal government has promised a bailout for troubled mortgage lenders Fannie Mae and Freddie Mac. Katie Couric talks about what this means for American homeowners.
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Video If Mortgage Giants Fall Bankrate.com's Greg McBride tells Katie Couric whether homeowners should be worried about the problems plaguing mortgage giants Fannie Mae and Freddie Mac, and gives some other finance advice.
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Interactive Inside The Fed A history of the Federal Reserve, glossary of terms and a look at changing interest rates.
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Fast Facts Fannie & Freddie A look at the government-sponsored siblings and their role in the mortgage market.
The Fannie and Freddie troubles came on the heels of the failure of IndyMac Bank. Earlier this year, a run on investment bank Bear Stearns pushed the company to the edge of bankruptcy and into a takeover by JPMorgan Chase, backed financially by the Fed.
"How long before we hear a splash? Is there a bottom?" Rep. Emanuel Cleaver, D-Mo., asked of the financial troubles.
Spencer Bachus of Alabama, the panel's most senior Republican, said of the housing boom-to-bust situation: "Fortunes were made on the way up and pain will be felt on the way down."
With the bust, banks and other financial companies have racked up huge losses due to soured mortgage investments. Foreclosures rose to record highs.
For a second day in a row, Bernanke outlined the economy's problems, including a housing slump, financial turmoil, credit troubles and high energy and food prices. And, employers have cut job for sixth straight months.
"Families are facing hardships ... this is clearly a rough time," Bernanke said. "It is clear (economic ) growth has been slow and the labor market is weak. So conditions are tough on average families."
The situation is tough on the Fed, too.
Caught between risky cross currents of plodding growth and rising inflation, Fed policymakers are facing "significant challenges" as they try to find a way to right the economy, Bernanke told lawmakers.
The Fed can't afford to lower rates again to shore things up because it will aggravate inflation. On the other hand, boosting rates to fend off higher prices would deal a setback to the fragile economy and the already crippled housing market.
Against that background, most economists predict Bernanke and his colleagues will leave rates alone when it meets next on Aug. 5.
"I think conditions clearly call for a second stimulus," said Rep. Barney Frank, D-Mass., chairman of the Financial Services panel.
Democrats in Congress are exploring more economic stimulus efforts to follow up on the $168 billion package, including tax rebates, enacted earlier this year.
Bernanke said it was a "bit premature" to go that route just yet but he didn't rule out such a course of action. He repeated his belief that the most important action Congress could take was to shore up the housing market.
It's difficult to chart a course when uncertainty abounds, Bernanke said.
Over the rest of this year, the economy will grow "appreciably below its trend rate" mostly because of continued weakness in housing markets, high energy prices and tight credit conditions.
At the same time, inflation has remained high and "seems likely to move temporarily higher in the near term," Bernanke warned lawmakers.
On that front, consumer prices jumped 1.1 percent in June, the fastest pace since September 2005, the government reported Wednesday. Another report, from the Fed, showed industrial production rising 0.5 percent in June. However, the increase reflected an end to an automotive production strike rather than any widespread strength in the economy.
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Bank of China 3988.HK 601988.SS , meanwhile, may hold roughly $20 billion worth of bonds issued by Fannie and Freddie, according to a research note by analysts at CLSA.
A Bank of China spokesman could not immediately be reached for comment. Because the U.S. government has taken steps to support Fannie and Freddie, CLSA said in its note that it regards the credit risk for the two as near to that of a sovereign credit rating for the government itself.
we are own by china and japan people, get use to it, even the ********** own more of this country than we do.
look as of today we have 300 million people in america, now lets look at these numbers that the govermnet will not give you.
real u.s. american-100 million
so called leigal ima-ants, 100 million
and eilegal not suppose to be here but sucking off america. 100 million.
the goverment said somewhere between 15 and 20 million. right. lier liers.
america is no longer america period..we are slave to the weathly..cant you see that american(real americans )
Liar
SAN FRANCISCO (MarketWatch) -- Japan''s private-sector financial institutions held slightly more than 10 trillion yen ($95 billion) in debt securities issued by U.S. mortgage lenders such as Fannie Mae and Freddie Mac as of the end of the fiscal year in March, according to a published report.
Both the government and the private sector have positioned the debt of U.S. mortgage firms as their core investment vehicles because of the entities'' high credit ratings and yields higher than those of Treasuries, the business daily Nikkei reported Thursday on its Website.
For now, Japanese financial institutions are not in a rush to unload them on the view that there is little risk of those products plunging in value, thanks to the effective guarantee by the U.S. government, Nikkei said.
they are saveing all there freinds on wallstreet and the world, like china,japan. f- the american is what congress and the whitehouse is saying..
"Bernanke: Fannie, Freddie In No Danger"
No, but Bob and Carol and Ted and Alice are.
IT IS OUR RIGHT IN THE CONSTITUTION TO REMOVE THEM IF THEY ARE NOT RESPONDING TO THE MAJORITY OF AMERICANS.. AND THEY HAVEN''T FOR OVER 5 YEARS NOW.
SO ARE WE READY, I KNOW I AM..LOCKED AND LOADED..
Sure, it is only tax payer money.