5 million homeowners now delinquent or in foreclosure.
Fannie Mae and Freddie Mac, the US mortgage debt giants the Government recently bailed out to the tune of $200 billion, will increase their purchases of mortgage-backed securities. At the same time, the Treasury will expand a programme where financial institutions can swap mortgage-backed securities for easier-to-trade Treasury assets. The 62-year old former chief executive of Goldman Sachs said that he would spend the weekend talking to Republicans and Democrats so that legislation allowing the bailout can be passed next week. It is not yet clear how much the US Government's bailout will cost the taxpayer. But so far, the US Government has spent more than $600 billion to support its creaking financial system.
Most recently, the Fed agreed a $85 billion loan to AIG, the troubled US insurance giant, before its $200 billion pledged to prop up Fannie Mae and Freddie Mac.
Earlier this year, it helped the eleventh-hour rescue of Bear Stearns by JP Morgan Chase. However, last weekend, the Government refused to step in and rescue Lehman Brothers, which was forced to file for bankruptcy on Monday. Since then, Barclays, the UK bank, has agreed to acquire Lehman’s US operations for around $2 billion. It is hoped that once the banks are able to rid themselves of such bonds, financial groups will begin lending to one another again, helping to return the world's most important capital market to normal. Mr Paulson rounded on “lax lending practices”, which he said had lead to “irresponsible lending and irresponsible borrowing”.
He said: “This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighbourhoods, with 5 million homeowners now delinquent or in foreclosure.” Earlier today, Washington announced a $50 billion (£27.3 billion) plan to guarantee America's money market funds in a move designed to restore confidence to the battered banking system. The arrangement, personally approved by President Bush, will guarantee money market funds, which hold the pensions and savings of millions of Americans. Earlier today, the Securities and Exchange Commission (SEC), in conjunction with the UK's Financial Services Authority (FSA), banned the short-selling of stocks.
The SEC said today it will ban short-selling on 799 financial stocks for 10 days but this could be extended for up to 30 days. In the UK, the FSA has prohibited short-selling, where traders make money by betting a share price will drop, for four months. Today’s temporary deal to insure money market funds — bankrolled by the Treasury's Exchange Stabilisation Fund — will inject confidence back into the stock market.
Money market funds are regarded as relatively safe since they invest in short-term securities that have a high credit rating and are not allowed to invest more than 5 per cent of the fund in any one financial institution. The funds seek to maintain a stable $1 net asset value, however, this week that value dipped to 96 cents — a price movement known as breaking the buck.
Most recently, the Fed agreed a $85 billion loan to AIG, the troubled US insurance giant, before its $200 billion pledged to prop up Fannie Mae and Freddie Mac.
Earlier this year, it helped the eleventh-hour rescue of Bear Stearns by JP Morgan Chase. However, last weekend, the Government refused to step in and rescue Lehman Brothers, which was forced to file for bankruptcy on Monday. Since then, Barclays, the UK bank, has agreed to acquire Lehman’s US operations for around $2 billion. It is hoped that once the banks are able to rid themselves of such bonds, financial groups will begin lending to one another again, helping to return the world's most important capital market to normal. Mr Paulson rounded on “lax lending practices”, which he said had lead to “irresponsible lending and irresponsible borrowing”.
He said: “This simply put too many families into mortgages they could not afford. We are seeing the impact on homeowners and neighbourhoods, with 5 million homeowners now delinquent or in foreclosure.” Earlier today, Washington announced a $50 billion (£27.3 billion) plan to guarantee America's money market funds in a move designed to restore confidence to the battered banking system. The arrangement, personally approved by President Bush, will guarantee money market funds, which hold the pensions and savings of millions of Americans. Earlier today, the Securities and Exchange Commission (SEC), in conjunction with the UK's Financial Services Authority (FSA), banned the short-selling of stocks.
The SEC said today it will ban short-selling on 799 financial stocks for 10 days but this could be extended for up to 30 days. In the UK, the FSA has prohibited short-selling, where traders make money by betting a share price will drop, for four months. Today’s temporary deal to insure money market funds — bankrolled by the Treasury's Exchange Stabilisation Fund — will inject confidence back into the stock market.
Money market funds are regarded as relatively safe since they invest in short-term securities that have a high credit rating and are not allowed to invest more than 5 per cent of the fund in any one financial institution. The funds seek to maintain a stable $1 net asset value, however, this week that value dipped to 96 cents — a price movement known as breaking the buck.
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