The US Treasury Department expressed support Sunday for Freddie Mac and Fannie Mae and stressed their 'important role' in the US housing finance system in an attempt to solve a crisis of confidence about their ability to resist the housing crisis.
US Treasury Secretary Henry Paulson unveiled measures Sunday to bolster key housing finance giants Fannie Mae and Freddie Mac, which were put under Federal Reserve oversight and given a bigger line of credit.
Paulson said the "central role" the two play in US real estate financing meant they should continue to respond to shareholders, and not be taken over by the federal government.
To protect them from liquidity problems Paulson said the two organizations would get a bigger credit line "temporarily." He did not give details on the amount of the credit line or terms.
And to ensure Fannie and Freddie can do their jobs, the Treasury Department will get temporary authority to buy their shares should that be necessary, Paulson said.
"We are grateful for the leadership of Secretary Paulson and (Fed) Chairman (Ben) Bernanke," Fannie Mae CEO and president Daniel Mudd said.
He urged Congress to deliver "swift passage of the new legislative proposals, as well as the important initiatives underway to assist homeowners and help restore stability to the housing market.
"We continue to hold more than adequate capital reserves and maintain access to liquidity from the capital markets," Mudd said.
"Given the market turmoil, having options to access provisional sources of liquidity if needed will help to strengthen overall confidence in the market. "We will continue to do our part to provide liquidity, stability and affordability to the housing market now and in the future."
White House press secretary Dana Perino said that "Fannie Mae and Freddie Mac play an important role in our housing finance system, and they should continue to play this role in their current forms as shareholder-owned companies."
"This evening, after working with the companies, the Federal Reserve, and other regulators, Treasury Secretary Paulson outlined a plan that we believe will help add stability during this period. President (George W.) Bush directed Secretary Paulson to immediately work with Congress to act on this plan," she added in a statement.
"It is crucial that Congress quickly works to enact this legislation as a complete package along with the strong oversight reform legislation recently passed in the Senate."
Troubled mortgage giant Freddie Mac is aiming to sell off three billion dollars in securities on Monday following last week's meltdown, in a potentially decisive move to heal shattered investor confidence.
The two government-chartered, shareholder-owned giants underpin some five trillion dollars in home loans, and the meltdown in their shares last week raised fears of a government bailout, or a possible worsening of the credit crunch.
Meanwhile the Board of Governors of the Federal Reserve System announced that it granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary.
Any lending would be at the primary credit rate and collateralized by US government and federal agency securities. This authorization is intended to supplement the Treasury's existing lending authority, officials said.
Date created : 2008-07-14