Trouble at Fannie and Freddie Stirs Concern Abroad

New York Times (07/21/08) P. C1; Timmons, Heather
As of the end of this year's first quarter, roughly 20 percent of securities issued by Fannie Mae, Freddie Mac and a few smaller quasi-governmental agencies were held by foreign investors, meaning that one out of 10 American mortgages is essentially owned by institutions and governments not based in this country. Now that the two big government-sponsored enterprises are faltering, analysts note that how their bailout is handled will ultimately test American markets in the world view and could have an effect on the level of interest rates and the strength of the dollar for years to come. This is why Treasury Secretary Henry Paulson Jr. is pressing Capitol Hill legislators for the power to inject billions in cash into either GSE or both. Paulson is betting that congressional lawmakers will overcome their hesitancy to give his office a de facto "blank check" to avoid the repercussions of doing nothing to save Fannie Mae and Freddie Mac.