The US government is reported to be considering injecting up to $15bn (Ј7.5bn) into the providers of mortgage funding Freddie Mac and Fannie Mae.
The extra capital could be announced before the US markets open on Monday, according to the London-based Sunday Times and Sunday Telegraph newspapers.
Freddie Mac and Fannie Mae guarantee almost half of all US home loans.
Their share prices fell nearly 50% last week amid fears that they might have trouble raising money.
Freddie Mac and Fannie Mae are known as government-sponsored enterprises (GSE) and they buy debt from the companies that sell mortgages to house-buyers.
They then sell on the Paulson admits regulatory errors ...
Week-long blackout hurts Zanzibar ... debt to investors and because they are government sponsored, the price of mortgages is kept low.
If investors decided to stop buying the debt from the two companies it would mean they would have to stop supporting the housing market and the already tough situation would get even worse.
Nationalisation rumours
On Friday US Treasury Secretary Henry Paulson was forced to issue a statement saying that he would support the two GSEs "in their current form" to dispel rumours of nationalisation.
Under the plan reportedly being considered, the US government would receive special shares in Fannie Mae and Freddie Mac, which would further reduce the already depressed value of the existing shareholders' stakes.
Mr Paulson is insisting that if there is to be a rescue then it must not benefit shareholders, the Wall Street Journal reported on Saturday.
Freddie Mac is due to sell $3bn in short-term debt on Monday, which may hasten the government's decision.
The Democratic White House hopeful Barack Obama has made his first comments about the problems facing the GSEs.
He described the situation as being of "extraordinary concern", but did not support an immediate bail-out.
"I think we need to watch carefully and see how it plays out before we make a decision about which steps need to be taken, if any," he told reporters on a flight to San Diego.
(BBC)
<< Back