U.S. Treasury moves to rescue huge lenders

WASHINGTON, July 14 (UPI) -- The U.S. Treasury Department asked Congress to approve a rescue plan for the nation's largest two mortgage lenders by extending their credit to $300 billion.

The Federal Reserve Bank also offered to make short-term lending available to the Federal Home Loan Mortgage Corp. and Federal National Mortgage Association on a temporary basis, The New York Times reported.

Collapse of either would have world-wide repercussions. The companies either own or guarantee nearly half of all U.S. mortgages. Debt securities they issue are owned by equities, foreign governments and pension funds around the world.

The companies have said they have enough cash but U.S. Treasury Secretary Henry Paulson Jr. said Sunday that U.S. President George Bush "asked me to work with Congress to act on this plan immediately."

The U.S. government isn't legally bound to rescue the lenders, which could put taxpayers behind a bailout of two institutions with trillions of dollars of debt.

However, "continued strength" in the lenders "is important to maintaining confidence and stability in our financial system and our financial markets," Paulson said. "Therefore we must take steps to address the current situation as we move to a stronger regulatory structure."