Fannie Mae and Freddie Mac CEOs ousted

On Sunday, the U.S. government took control of major mortgage finance companies Fannie Mae and Freddie Mac, embarking on what could be it’s largest federal bailout ever, in an effort to support the sinking national housing market and avoid more global financial market turmoil.

The companies’ top executives were ousted. Fannie Mae’s CEO Daniel Mudd and Freddie Mac chief executive Richard Syron, were replaced in the process by Herb Allison, formerly with Merrill Lynch and pension fund TIAA-CREF and David Moffett, a former top official at US Bancorp.

Top officials were highly concerned with ever rising losses at the two companies, which own or guarantee almost half of the nation’s $12 trillion in outstanding home mortgage debt.

"Our economy and our markets will not recover until the bulk of this housing correction is behind us," U.S. Treasury Secretary Henry Paulson said in a White House communique. "Fannie Mae and Freddie Mac are critical to turning the corner on housing."

Both companies, publicly traded but serving as well a government mission to support housing, were placed in a conservatorship that allows their stock to keep trading but puts shareholders last in any claims.

The National Treasury is immediately going to take stakes of $1 billion in each company. Those stakes are expected to grow to get as large as $100 billion. The Treasury will also receive warrants to buy up to 79.9 percent of the common stock.

Federal Chairman Ben Bernanke fiercely supported the action in order to avoid a major financial meltdown. "These necessary steps will help to strengthen the U.S. housing market and promote stability in our financial markets," he declared on Sunday.

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