The White House told ailing mortgage giants Fannie Mae and Freddie Mac today that Washington will effectively take them over, the Wall Street Journal reports. The Treasury move will leave both companies functioning but replace their executives, inject capital, and likely leave shareholders with little or nothing. The move aims to keep interest rates on mortgages low and reassure investors that the companies will stay afloat.
Investors want to see the Treasury Department "in there with us," one expert said; the government has to "swim in the pool, not just be a lifeguard." The move was prompted by declining financial and housing markets that left foreign governments nervous and investors wary—and was timed to avoid making such a move closer to the November election, the New York Times reports.