IMPEACH BUSH

SINGAPORE: The US government needs to play a larger role in restoring confidence to financial markets on the verge of a meltdown instead of leaving such actions to Federal Reserve, said former Fed chairman Paul Volcker.

Such measures may include Fannie Mae and Freddie Mac, the world's largest mortgage companies, using their lines of credit with the US Treasury to buy some of their own securities to assure investors of such debt, Volcker said.

Fed Chairman Ben S Bernanke is struggling to cushion consumers and companies from the worst of the credit freeze that's made some of the world's biggest banks reluctant to lend to each other.

"The Federal Reserve is designed to lend to banks," Volcker said. "In this situation, they stepped in and nobody else was there to do it. I don't think we should sit back and say, well, take care of the next one, or do more."

"The federal government doesn't have the capacity right at the moment to step in, but there are two big institutions out there, Fannie Mae and Freddie Mac, that were created to deal with the mortgage market," Volcker said. "They have a credit line to the Treasury, which I'm sure they would hate to use. But on the other hand, what's it there for?"

Fannie Mae and Freddie Mac, created by Congress to increase financing available to homebuyers, own or guarantee about 40 per cent of the nation's 11.5 trillion dollar residential mortgage market. The companies profit by holding mortgages and mortgage bonds as investments and by charging a fee to guarantee and package loans as securities.

The Treasury Department has authority to buy 2.25 billion dollar in each of the companies' securities in the event of default, which serves as a kind of credit line.