George W Bush says that the consequences of letting Fannie Mae and Freddie Mac collapse necessitated the firms' nationalisation.
The American government has taken the drastic step of taking over the country's two largest mortgage lenders, Fannie Mae and Freddie Mac.
Both firms have been facing severe revenue concerns due to the credit crunch, and had been the subject of previous legislation from Congress this summer, which effectively guaranteed them unlimited financial support from the government. Accordingly, it is a body which was created by these new laws, the Federal House Financing Agency, that will run the firms following their Northern Rock-style takeover.
The chief executives of Fannie and Freddie - who between them hold around half of the total US mortgage debt - have also been replaced.
Had the firms been allowed to collapse by the government, the consequences would have been catastrophic for the American and global economies, US Treasury secretary Henry Poulsen said.
"Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in our financial markets here at home and around the globe," he added. "A failure would [also] affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance."
US president George W Bush commented: "Putting these companies on sound financial footing, and reforming their business practices, is critical to the health of our financial system. The actions taken today are temporary, and will support housing finance in the near term."
Around nine per cent of US homeowners are thought to be currently in mortgage arrears.
