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  • How US mortgage debt could cause a global financial crisis

    07/06/2006 6:40:55 AM PDT · by Hydroshock · 198 replies · 2,986+ views
    Moneyweek.com ^ | 7-5-06 | Dan Denning
    In the US, Fannie Mae (FNMA) and Freddie Mac are Government Sponsored Enterprises (GSEs) which buy residential mortgages and repackage them to sell on as mortgage-backed bonds. Although these bonds are not backed by the US government, most believe the GSEs would never be allowed to fail. But Dan Denning reports below on how a US Treasury report has warned that this mistaken belief and the illiquid nature of property means that an ‘interest rate shock’ could topple the US mortgage market – making the Long Term Capital Management (LCTM) crisis look like a walk in the park... Could this...