Fannie and Freddie: Action This Week
Brendan Murray and Dawn Kopecki:
Bloomberg.com: Treasury Secretary Henry Paulson... speaking on the steps of the Treasury facing the White House, asked Congress for authority to buy unlimited stakes in and lend to the [GSEs].... The Federal Reserve separately authorized the firms to borrow directly from the central bank.... Paulson's proposal, which the Treasury anticipates will be incorporated into an existing congressional bill and approved this week, signals a shift toward an explicit guarantee of Fannie Mae and Freddie Mac debt.... Paulson proposed that Congress enact legislation giving the Treasury temporary authority to buy equity ``if needed'' in the firms, and to increase their lines of credit with the department from $2.25 billion each. The temporary authority may be for 18 months....
Freddie Mac is scheduled to sell $3 billion in short-term notes tomorrow.... Preferred securities tumbled in Asian trading as investors questioned if Freddie and Fannie will be able to continue to pay dividends.... Senator Charles Schumer, a Democrat from New York who chairs the Joint Economic Committee of Congress, praised Paulson's plan, saying it "is surgical and carefully thought out and will maximize confidence in Fannie and Freddie while minimizing potential costs to U.S. taxpayers."...
Senior debt of both companies trades as if they were rated A3 instead of Aaa by Moody's Investors Service, according to data from the rankings firm's credit strategy group...
