Takeover no ‘panacea for bad debts’

THE takeover of the two biggest mortgage providers in the US, Fannie Mae and Freddie Mac will help ease the credit crunch crisis.

But leading economist Clive Granger warned the move was not a panacea for all the bad debts lurking below the surface in the US mortgage market.

“What’s amazing is that no one seems to have quantified the whole problem. The problem was much bigger than anyone anticipated and no one has been able to add up the figures and say this is what the figure is because you can’t untangle the damn stupid passing on of the debt internationally,” said Granger.

While stock markets boomed on the back of the intervention, other analysts warned that the bad debt crisis, triggered by the US subprime collapse, was not going to vanish.

But Granger agreed the move would ease the credit crisis and help restore some confidence in the markets, including the Irish lending situation.

Galway University lecturer Alan Ahern said the intervention of the Federal Reserve was very welcome.

Fannie and Freddie’s collapse would have had global implications and that threat has been removed at this stage, Ahern said.

Stuart Draper of Dolmen Stockbrokers said it would give a boost to the credit markets by easing the fear about banks lending to each other, which has crippled markets since August 2007.

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