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Government Tightens Reins on Fannie, Freddie

The U.S. Treasury on Friday revamped the bailout of Fannie Mae and Freddie Mac to curb chances the giant mortgage finance firms could emerge from government control as the powerful, profit-driven corporations they once were.

The Treasury said it would require the companies, whose massive losses threatened the financial system after the housing bubble burst in 2007, to shrink their investment portfolios more quickly and turn over any profits to taxpayers.

Previously, the companies, which buy mortgages from lenders and repackage them as securities for investors, were required to make a 10 percent dividend payment to the Treasury. At times, they had to borrow from the Treasury just to make the payments. Now, they simply won't be able to retain any profits.

Source: Reuters. Read full article. (link)

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