Washington take-over of Fannie & Freddie welcomed

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Washington take-over of Fannie & Freddie welcomed

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Washington’s take-over of the US’s two major mortgage financial companies has been welcomed with relief.

Both the IMF and Japan have approved of the US government’s decision on Sunday to seize control of Fannie Mae and Freddie Mac.

It is a move that was necessary, according to US Treasury Secretary Henry Paulson.

“Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil, here at home and around the globe,” he said.

The move was the latest in a series of emergency steps taken by the US administration to support the ailing housing market and ward off a global crisis.

Some analysts have criticised the government’s interventionism.

“If you have no confidence in private institutions because you are worried about their ability to survive, you need someone like Uncle Sam, who nobody will question the ability to survive stepping in and actually acting as a backstop,” said Guy Cecala from Inside Mortgage Finance.

Both candidates to the US presidency have also welcomed the move.

While Democrat Barack Obama spoke of the need to protect the taxpayer, his Republican rival John McCain said the companies would eventually have to be privatised.