The federal government yesterday gave Fannie Mae and Freddie Mac permission to operate with a reduced safety net in order to increase their aid to the troubled mortgage market.
The step could allow the two federally chartered finance companies to immediately increase their investment in mortgages by a combined $200 billion, potentially compensating for weak demand from other investors. That could improve the availability and affordability of home loans, leaders of the two companies said.
Together, the two companies already hold more than $1.4 trillion of mortgages and securities backed by mortgages.
This is going to make matters worse.
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