Fed and Treasury Up Again

Recent moves by the US Treasury to purchase equity in Fannie and Freddie tell us two things.

1. They are in danger of going bankrupt.
2. The treasury will not allow them to go out of business.

Even though shareholders might lose all their money, the companies will still be reconstituted by injections of US government cash.

Along with this announcement came the news that the Fed will lend to the mortgage buying behemoths if necessary.

These two actions will support home lending by ensuring the ability to sell mortgages in the secondary market.