Analystsare speculating what unorthodox policy measures US policy makers might resort to, following Sunday’s decision by the Federal Reserve to offer emergency financing to all its primary dealers. Financial Times
Experts believe US authorities will have to go further and use public funds to halt the crisis. Possibilities include guaranteeing Fannie Mae and Freddie Mac debt, provision of large-scale alternative guarantees through the Federal Housing Administration, and direct purchase of mortgages or homes.
This could be done by the Fed, which has legal authority to buy loans backed by Fannie and Freddie. The Fed is prepared to do more than it is at present if necessary. But most experts believe outright intervention that puts taxpayer money at risk would be more properly conducted by the US Treasury.
Treasury has as yet offered no indication that it is prepared to consider this, though officials are now signalling they will do what is required to ensure the orderly functioning of markets and protect the real economy.