Fannie, Freddie takeover is a bet that banks will lend

09/8/2008 | Bloomberg

The Treasury Department's takeover of Fannie Mae and Freddie Mac is a bet by Secretary Henry Paulson that the move will foster more lending by banks. Banks, however, could still be reluctant to make mortgages with unemployment rising and real earnings falling. "If the housing market doesn't turn around, then Fannie and Freddie become bad assets," said Vincent Reinhart, former director of the Federal Reserve's Monetary Affairs Division.

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