For those who don’t know, Fannie Mae and Freddie Mac are chartered finanicial institutions that guarantee 60 percent of the U.S. home loan market. Both are in serious trouble because of the meltdown in the housing market.

The U.S. Federal Reserve Bank

They dominate the top-tier of lenders that control $6 trillion of mortgage lending. A collapse would trigger an unprecedented crisis across the world’s largest economy and swift knock-on effects around the globe.

The Fed is pulling every lever available to it to neutralize the toxic effects of the subprime disaster. It’s predicted to lower rates by another 75 basis points within days, and is now offering Treasury bonds in exchange for mortgage debt. By soaking up some of the poison, the central bank hopes to take the sting out of the troubled banking crisis.

Like the British mortgage bank, Northern Rock, Freddie and Fannie may have to be nationalized to shore up the economy.

Bernard Connolly, Global Strategist at Banque AIG, believes Fed action won’t solve the problem of eroded of bank capital. “There is the risk of a very damaging credit contraction. We face the most serious global crisis since the Great Depression. But this time at least the North American central banks are doing their best to stop it spreading to the real economy. We should be thankful that we have people in charge who appreciate the gravity of the situation.”