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BUSINESS
Report: Government may soon back Fannie Mae, Freddie Mac
WASHINGTON -- The government may soon step in to provide a financial boost to mortgage finance companies Fannie Mae and Freddie Mac, the Wall Street Journal reported late Friday.
The paper said an announcement "could come as soon as this weekend" but said exact details of the plan couldn't be learned. It said the plan would include executive changes at both companies.
Representatives of Fannie and Freddie declined to comment. Treasury spokeswoman Brookly McLaughlin said officials "have been in regular communications" with Fannie and Freddie, but refused to comment on the story saying, "We are not going to comment on rumors."
Treasury recently signed a contract with Morgan Stanley to investigate the financial position of Fannie and Freddie, with help from the Federal Housing Finance Agency, the new regulatory body created by Congress to oversee the mortgage giants.
Asked if an announcement could come soon, McLaughlin said, "We are making progress in the work with Morgan Stanley and FHFA." A spokeswoman for the FHFA also declined to comment.
This summer, Congress passed a plan to provide unlimited government loans to Fannie and Freddie and to purchase stock in the two companies if needed.
Critics say the open-ended nature of the rescue package could expose taxpayers to billions of dollars of potential losses.
Supporters, however, argue the Bush administration had little choice but to support Fannie and Freddie, which together hold or guarantee $5 trillion in mortgages -- almost half the nation's total.
Many in Washington and on Wall Street hadn't expected Treasury Secretary Henry Paulson to intervene unless the companies had trouble issuing debt to fund their operations.
The report of possible government action came after stock markets closed. In after-hours trading, Fannie Mae's shares fell 17 cents to $6.87. Freddie Mac's shares were unchanged at $5.10
