US GSE bailout necessary step to calm market -HKMA
September 8th, 2008 | by admin |By Tamora Vidaillet
BASEL, Sept 7 (Reuters) - Hong Kong welcomes moves by theU.S. government to seize control of mortgage finance firmsFannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) as this shouldstabilise the stressed market, its central bank chief said.
Speaking to Reuters, Joseph Yam, who heads the Hong KongMonetary Authority, said the bailout of the twogovernment-sponsored Enterprises was an unusual and “possiblycontroversial” step but necessary given the circumstances.
“As investors in debt issued by the two GSEs, we of coursewelcome the measures,” Yam said.
“It should have a useful, tranquillising effect on the verystressful market,” he said on the sidelines of a bi-monthlymeeting of central bank governors at the Bank for InternationalSettlements.
Washington launched what could be the U.S. government’sbiggest federal bailout ever on Sunday in a bid to support thedomestic housing market and ward off more global financialmarket turbulence.
Mounting losses at the two companies, which own orguarantee almost half of the country’s $12 trillion inoutstanding home mortgage debt, have been weighing on thedomestic housing market and threatening to damage the broaderfinancial system, under stress for more than a year.
The Treasury also set up a programme under which it wouldbuy mortgage-backed securities currently held by Fannie Mae andFreddie Mac to pump fresh funds into the mortgage market.
Yam said the steps would support the continued availabilityof mortgage finance in the United States and that they amountedto making explicit the implicit guarantees by the U.S.government on the debt issued by the GSEs.
