A case in point: Since the financial market collapse in 2007, almost 90% of the country’s mortgages have been bought or guaranteed by the two companies. Some critics blame Fannie and Freddie’s troubles on government mandates to finance more loans for lower-income Americans. But Wall Street firms started the rush into risky subprime and exotic loans; Fannie and Freddie just followed their competitors’ lead. The real problem with Fannie and Freddie was that the public assumed correctly, as it turns out that the government wouldn’t allow them to fail, making them more attractive to lenders and investors. They grew too big and took on far too much risk, precipitating a $187-billion bailout.
Finance ministry works overtime to firm up steps to arrest rupee fall
Mr Chidambaram had earlier said the government would be looking at some compression in non-oil and non-gold imports, especially of non-essential goods. He had specifically cited the examples of coal and electronic hardware and said that the officials would be working out a list of imported items that could be compressed. The Minister had also said that blue chip public sector undertakings could be encouraged to raise funds from overseas markets. Pursuant to the announcement, heads of several PSUs met Finance Ministry officials, pleading for relaxation of the ECB norms. The new measures being considered by the Finance Ministry are in addition to steps taken recently by the Reserve Bank to tighten liquidity and curb volatility in the rupee, which touched a life-time intra-day low of 61.80 to the dollar on August 6.
Finance Ministry working on additional steps to contain rupee fall
Some announcements are likely to be made by the Ministry on Monday, either in Parliament or outside, sources said. The steps being contemplated by the Ministry to check the rupee fall and boost forex flows include further relaxation of external commercial borrowing (ECB) norms for state-owned companies, curbs on import of non-essential goods and encouragement to exports. Mayaram, after a meeting of the Financial Stability and Development Council in Mumbai earlier this week, had said, “You should wait till the end of the week. The Finance Minister will be talking about this (outcome of the meeting) later.” Chidambaram held meetings on Friday with senior officials, including Commerce Secretary S R Rao, and is believed to have discussed measures to check the import of non-essential goods.