Market Stumbles, but Hasn't Fallen Yet

Sallie Mae and Freddie Mac, the two largest holders of mortgages in the US, were offered assistance by President Bush. However, confident in their own solvency, they turned down the help; nonetheless, the government stands ready to write the big check if necessary.

"No danger of failing." Those were the words current Federal Reserve Chairman Ben Bernanke used to describe the situation of Freddie Mac and Fannie Mae. In his opinion there is no way there recent troubles of two of the largest lenders could cause them to fail. At least that's what he told the House Financial Services Committee on Wednesday.

More than half of the nation’s mortgages are held by the two companies with an estimated 5 trillion in total assets currently lent to homebuyers. After Sunday's benchmark decision by President Busch to bail Mac and Mae out of financial troubles some analysts are saying the two lenders are destined to fail and without the government stepping in to offer support failure would have been eminent.

According to Bernanke its not the fact that the companies don't have the money to support the mortgages they have financed, it's that the poor economy has caused trouble in raising capital. With home buyer confidence at an all time low following the subprime mortgage failure in 2007 shareholders have been selling off their stock in the two companies at an alarming rate. Investors are choosing to take their money elsewhere rather than take chances on an industry with a poor short term outlook.

While the money has yet to be given to Sallie Mae or Freddie Mac the US Treasury Secretary says that the government is ready and willing to help these two industry giants out of a tough spot should the need arise. The hope is that in offering the financial capital investors will see Mac and Mae as safe bets in an otherwise dismal market.