Translated material
Panic under control
US authorities rescue mortgage agencies
US financial authorities are making new attempts to prevent panic in financial markets. Treasury Secretary Henry Paulson announced financial support for mortgage agencies Fannie Mae and Freddie Mac . Chairman of the US Federal Deposit Insurance Corporation (FDIC) Sheila Baer assured individual depositors of the reliability of the vast majority of American banks. At the same time, the US Securities and Exchange Commission announced that it was conducting an investigation to determine whether rumors of problems at mortgage companies were an attempt to manipulate market prices.The Fed announced after a board meeting on Saturday in Washington that Fannie Mae and Freddie Mac, “if necessary,” could take advantage of the emergency loans it is providing to financial companies. In addition, in this case, the Ministry of Finance plans to obtain the authority to buy out shares of both agencies and expand already open credit lines for them. These decisions of the Ministry of Finance and the Federal Reserve must still be approved by Congress.
The market took this news with optimism: at the beginning of trading yesterday, Freddie Mac stock quotes rose by 29%, to $9.98, and Fannie shares rose in price by the same amount - to $13.24 per share. In addition, Freddie Mac yesterday successfully placed short-term bonds worth $3 billion. Obviously, demand was supported by the measures announced by the Ministry of Finance and the Federal Reserve. The mortgage company placed three-month securities for $2 billion at 2.309% and six-month securities for $1 billion at 2.496% per annum, Interfax reports. Freddie Mac issues three- and six-month bonds every Monday.
Part of Russia's gold and foreign exchange reserves - about $100 billion - is invested in bonds of these two American mortgage agencies. At the end of last week, the Ministry of Finance made a special statement that it considers these investments to be reliable. Yesterday, Deputy Minister of Finance Dmitry Pankin said that the Ministry of Finance sees no reason to change the share of Fannie Mae and Freddie Mac bonds in assets to accommodate the reserve fund and the national wealth fund. As you know, the Ministry of Finance converts the funds of national funds into foreign currency and places them in accounts with the Central Bank, which in turn invests these funds within the framework of international reserves, including in securities of the most reliable foreign issuers.
As is known, the hasty actions of the US financial authorities are associated with the panic of investors who do not exclude the bankruptcy of Fannie Mae and Freddie Mac - agencies that control half of the entire US mortgage market. At the end of last week, massive sales of shares of both companies began on the market after information was published in the New York Times about the possible transfer of Fannie and Freddie under government control. This is not the first time that panic begins in the stock market due to rumors; a similar thing recently happened with the quotes of securities of investment banks Lehman Brothers and Bear Stearns (the latter, as is known, was saved only through its urgent sale). Therefore, the US Securities and Exchange Commission began an investigation into the dissemination of false information for the purpose of manipulating prices. The review will also involve the self-regulatory organization Financial Services Authority and the regulatory division of the New York Stock Exchange.
The authorities have to defend themselves not only against stock market investors, but also against private investors who are concerned about the transfer of IndyMac Bank to state control. In just 11 days, his clients withdrew $1.3 billion from their deposits. In an attempt to allay depositors' doubts and concerns, FDIC Commissioner Sheila Baer said that insured deposits were safe: “The likelihood of your bank coming under FDIC control is very low.” . But even if this happens, you will still have access to your insured deposits. Not a single depositor has lost a single cent yet... the vast majority of the country's banks are safe and sound.”
The FDIC insures deposits at nearly 8,500 American banks and savings associations. The insurance generally covers up to $100,000 in each depository institution and up to $250,000 in some retirement accounts.