Analysts say the Canadian economy is likely to benefit in the long run from the decision by the Federal Reserve and the U.S. Treasury Department help the mortgage lenders known as Fannie Mae and Freddie Mac.
The Federal National Mortgage Association, usually referred to as Fannie Mae, and the Federal Home Mortgage Corporation, nicknamed Freddie Mac, are the two biggest mortgage lenders in the United States.
Without the U.S. government’s support for the two giant lenders, analysts say, confidence in the American mortgage and house construction industries would be further eroded - affecting the broader U.S. and Canadian economies, they said..
“Those institutions (Fannie Mae and Freddie Mac) can’t go down, and there can’t be a loss of confidence in them,” said Don Drummond, chief economist at TD Bank.
The U.S. housing market “is already on its knees, if it’s not already on its ankles. You can’t have that major leg pulled out from under it at this point” without major repercussions, he said.
The Federal Reserve and U.S. Treasury Department “didn’t have any choice” but to extend their support to the two publicly traded institutions, Drummond said.
For Canada, if they went down “it would be horrendous for the U.S. housing market … and that would affect Canada not only because the U.S. economy in general would go down, but also it would be a further blow directly to our forestry industry.”
Canada’s forestry industry supplies billions of dollars in lumber and an implosion of Fannie Mae and Freddie Mac could further hurt Canadian companies mainly in British Columbia, Ontario, Quebec and the Maritimes.
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