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US Government Close to Rescue Plan for Troubled Mortgage Finance Companies Fannie Mae, Freddie Mac


The U.S. government is close to taking over the country's biggest mortgage finance companies, Fannie Mae and Freddie Mac, an emergency move to protect the troubled companies from collapse.

Sources close to talks between Bush administration officials and the chief executives of the companies say the two sides discussed the plan Friday.

Under the plan, the federal government could use tax money to pay for mortgage-related losses. It is also likely the leaders of the two companies would be replaced.

A downturn in the U.S. housing market has cost Fannie and Freddie billions of dollars. The two companies own or guarantee nearly half of all mortgages in the United States, and their health affects the entire U.S. economy.

While Fannie and Freddie are owned by shareholders such as private companies, they have historically operated with government oversight.

Critics of a government bailout complain that the cost will be placed on taxpayers, while investors fear the move will wipe out the value of the companies' stocks.

The collapse of the housing and mortgage markets has contributed to a broader slowdown in the U.S. economy.

The labor market reported the most recent decline. A report issued Friday showed the unemployment rate has risen to its highest level in five years, at 6.1 percent.

The Labor Department report showed the U.S. economy shed jobs for the eighth month in a row. A total 600,000 jobs have been lost this year.

Some information for this report was provided by AP.