August 6, 2007 (LPAC)--Bankers, pinched between the "bookends" of rising interest rates and disappearing investors, are now turning their eyes toward what they view as the "investor of last resort" - the federal government. Shares of Federal home mortgage giants Fannie Mae and Freddy Mac jumped today, as word spread that regulators might allow them to inject money into the collapsing housing bubble. This came as American Home Mortgage officially filed for bankruptcy Monday, admitting that, although it had $19 billion in assets, its lenders decided they wanted their money back. The creditors, as revealed in court papers, included some of the world's largest financial institutions: Deutsche Bank, Citigroup, Bank of America, Lehman Brothers, Bear Stearns and the British HSBC.

What the banks are now pushing is for government regulators at the Office of Federal Housing Enterprise Oversight (OFHEO) to lift the "cap" that limits how much the government-supported institutions are allowed to invest. This would help ease what Bloomberg euphemistically calls a "slump in demand" for mortgages. The limits were imposed on both Fannie Mae and Freddy Mac in 2005, after they admitted to over $11 billion in "accounting errors."