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| Version 1 | Version 2 |
|---|---|
| Markets jump on US mortgage deal | Markets jump on US mortgage deal |
| (30 minutes later) | |
| Shares in Asia have rallied after the US government said that it was taking over troubled mortgage giants Freddie Mac and Fannie Mae. | Shares in Asia have rallied after the US government said that it was taking over troubled mortgage giants Freddie Mac and Fannie Mae. |
| Investors hoped the largest bail-out in US history would prop up the country's housing market and ultimately help to end the credit crunch, analysts said. | Investors hoped the largest bail-out in US history would prop up the country's housing market and ultimately help to end the credit crunch, analysts said. |
| Japan's Nikkei index and Hong Kong's Hang Seng index were up by about 4%. | Japan's Nikkei index and Hong Kong's Hang Seng index were up by about 4%. |
| US president George Bush said the two lenders had posed "an unacceptable risk" to the economy. | US president George Bush said the two lenders had posed "an unacceptable risk" to the economy. |
| The two companies finance or guarantee nearly half of the outstanding mortgages in the US, and have lost billions of dollars during the US housing crash. | The two companies finance or guarantee nearly half of the outstanding mortgages in the US, and have lost billions of dollars during the US housing crash. |
| The news is a positive surprise for the markets Graham NealeKillick & Co Q&A: Freddie Mac and Fannie Mae | |
| The most recent figures show that about 9% of US homeowners were behind on their payments or faced repossession. | The most recent figures show that about 9% of US homeowners were behind on their payments or faced repossession. |
| Rally inevitable | |
| Observers expect other world markets will also react well to the weekend developments. | Observers expect other world markets will also react well to the weekend developments. |
| In London, the FTSE 100 lost 7% last week - its worst showing in more than six years. On Wall Street, the Dow Jones index shed 4% across the previous five sessions. | In London, the FTSE 100 lost 7% last week - its worst showing in more than six years. On Wall Street, the Dow Jones index shed 4% across the previous five sessions. |
| "The markets are certainly going to rally today because investors are going to say 'Maybe we can see light at he end of the tunnel in terms of the credit crunch'", said Graham Neale of private stockbrokers Killick & Co. | |
| "There have been calls on the US administration for some time to act more decisively but the administration has been playing it quite poker faced so the news is a positive surprise for the markets. | |
| "Whether it will actually proves to be the end of the credit crunch is difficult to say." | |
| Bankruptcy fears | Bankruptcy fears |
| The government takeover was announced on Sunday by Treasury Secretary Henry Paulson. | The government takeover was announced on Sunday by Treasury Secretary Henry Paulson. |
| As part of the changes, the management of the two companies will be replaced while the firms will be given access to extra funding to support their business going forward. | As part of the changes, the management of the two companies will be replaced while the firms will be given access to extra funding to support their business going forward. |
| Mr Paulson said the government was intervening in the wider interests of the financial system and of taxpayers since the financial position of the two firms was fast deteriorating. | Mr Paulson said the government was intervening in the wider interests of the financial system and of taxpayers since the financial position of the two firms was fast deteriorating. |
| The move is intended to keep the two companies afloat, amid fears that either could go bankrupt as borrowers default on their home loans. | The move is intended to keep the two companies afloat, amid fears that either could go bankrupt as borrowers default on their home loans. |
| Together, Freddie Mac and Fannie Mae own or guarantee about $5.3 trillion (£3 trillion) of mortgages. | Together, Freddie Mac and Fannie Mae own or guarantee about $5.3 trillion (£3 trillion) of mortgages. |
| But they have made a combined loss of about $14bn in the past year and officials were worried that they would no longer be able to continue functioning if such losses continued. | But they have made a combined loss of about $14bn in the past year and officials were worried that they would no longer be able to continue functioning if such losses continued. |
| Banks around the world are highly exposed to the two companies and therefore, given the febrile state of markets across the world, it had become dangerous for doubts to persist about whether they were viable and would be able to keep up the payments on their massive liabilities, says the BBC's business editor Robert Peston. | Banks around the world are highly exposed to the two companies and therefore, given the febrile state of markets across the world, it had become dangerous for doubts to persist about whether they were viable and would be able to keep up the payments on their massive liabilities, says the BBC's business editor Robert Peston. |
| A rescue plan passed by Congress in July gave the US government the authority to offer unlimited liquidity to the two companies, and to buy their shares, in order to keep them afloat. | A rescue plan passed by Congress in July gave the US government the authority to offer unlimited liquidity to the two companies, and to buy their shares, in order to keep them afloat. |