U.S. govt considering takeover of Fannie and Freddie

TOKYO (Reuters) - The U.S. government is considering taking over the top U.S. mortgage lenders Fannie Mae (FNM.N) and Freddie Mac (FRE.N) and placing them into conservatorship if their problems worsen, the New York Times reported, citing people briefed about the plan.

Under conservatorship, the shares of Fannie and Freddie would be worth little or northing, and any losses on the mortgages they guarantee would be paid by taxpayers, the New York Times said in the report published late on Thursday.

Senior officials in the Bush administration had considered calling for legislation that would offer an explicit government guarantee on the $5 trillion (2.5 trillion pounds) of debt owned or guaranteed by the companies, but that was considered unattractive because it would effectively double the size of the public debt, the paper reported.

The report gave a boost to investors who have fretted about the financial condition of Fannie and Freddie all week, sending the dollar slightly higher and sparking a rebound in Asian stock markets.

For the New York Times report online, click on: ">here

(Reporting by Eric Burroughs)