Will unlimited Fannie and Freddie bailouts prop up housing?

Dec.December 29, 2009 04:05 PM

On Christmas Eve, the government announced it would uncap the amount of bailout money allotted for Fannie Mae and Freddie Mac, giving the two mortgage giants any amount they need over the next three years. This week, in a Wall Street segment, financial journalists debated whether the move was a sign that the government is getting ready to prop up the housing market once again. “They don’t necessarily need the money, but the Treasury will lose its power to unilaterally give money to them at the end of next year,” said Nick Timiraos, a Wall Street Journal reporter. By increasing the amount of money given to Fannie Mae and Freddie Mac, the government hopes to increase the amount of aggressive writedowns on mortgages and improve the Home Affordable Modification Program, according to MarketWatch reporter Alistair Barr. “Since many people see their net worth as the value of their home, stability in housing is key even if we see a second dip in prices,” said Mike Reid, Dow Jones Newswires deputy managing editor. “The unlimited allocation to Fannie and Freddie will certainly prop up the housing market,” added Barr.

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