WASHINGTON, Sept. 7 (UPI) -- U.S. Treasury Secretary Henry Paulson said Sunday the federal government will take over teetering giant mortgage firms Fannie Mae and Freddie Mac.
Paulson said the intervention was necessary because they are "critical to turning the corner on housing."
"Through the four actions we have taken today, (the Federal Housing Finance Agency) and Treasury have acted on the responsibilities we have to protect the stability of the financial markets, including the mortgage market, and to protect the taxpayer to the maximum extent possible," Paulson said in a statement.
The move came after a published report indicated the companies, which own or back $5.3 trillion in mortgages, failed to properly account for losses, using questionable accounting methods to push them into the future so that they wouldn't need to be reported until next year, sources told The New York Times.
Paulson's decision will mean the Treasury Department will begin buying mortgage securities in a move meant to bolster confidence by the companies' foreign debt holders, hopefully restoring confidence to the credit markets and bringing stability to the U.S. stock market.
The bailout of Fannie Mae and Freddie Mac is likely to cost U.S. taxpayers tens of billion of dollars, the newspaper said.