• Loan Giant Overstated the Size of Its Capital Base
  • Paulson to Take Over and Restructure Fannie, Freddie
  • Treasury plan won’t help Fannie, Freddie shareholders: Frank
  • Takeover May Help Homebuyers, Hit Fan-Fred Shareholders
  • Obama, McCain Back Treasury Action to Rescue Freddie, Fannie
  • Paulson readies the ‘bazooka’
  • Washington’s Fannie And Freddie Plan: Why Now?
  • Paulson Meets With Bernanke, Fannie, Freddie Chiefs
  • U.S. Nears Rescue Plan For Fannie And Freddie
  • Questions, and Hope, on Plans for Mortgage Giants

Loan Giant Overstated the Size of Its Capital Base
- NY Times
 

The government’s planned takeover of Fannie Mae and Freddie Mac, expected to be announced as early as this weekend, came together hurriedly after advisers poring over the companies’ books for the Treasury Department concluded that Freddie’s accounting methods had overstated its capital cushion, according to regulatory officials briefed on the matter. 

The proposal to place both mortgage giants, which own or back $5.3 trillion in mortgages, into a government-run conservatorship also grew out of deep concern among foreign investors that the companies’ debt might not be repaid. Falling home prices, which are expected to lead to more defaults among the mortgages held or guaranteed by Fannie and Freddie, contributed to the urgency, regulators said……

Paulson to Take Over and Restructure Fannie, Freddie
- Bloomberg
 

Treasury Secretary Henry Paulson will use his authority to rescue Fannie Mae and Freddie Mac, likely placing the beleaguered mortgage-finance companies under government control as early as this weekend.
 
  The Treasury plans to put Fannie and Freddie into a so- called conservatorship and pump capital into the companies, House Financial Services Committee Chairman Barney Frank said in an interview after being briefed by Paulson. The government would make periodic injections of funds by buying convertible preferred shares or warrants in the companies as needed, avoiding large up- front taxpayer costs, according to a person briefed on the plan.
 
  “This is no bailout, particularly for the shareholders,” Frank said. The federal government “will be senior to all shareholders, preferred and common.”…..

Treasury plan won’t help Fannie, Freddie shareholders: Frank
- Reuters
 

Fannie Mae and Freddie Mac shareholders, including preferred stockholders, will not fair well under a proposed U.S. Treasury takeover of the two housing finance companies, House Financial Services Committee Chairman Barney Frank told Reuters on Saturday.
 
  "I think all shareholders will be disadvantaged," Frank said in a Reuters interview when asked if holders of preferred stock of the government sponsored enterprises could also be wiped out along with common stockholders under the Treasury plan…..

Takeover May Help Homebuyers,
Hit Fan-Fred Shareholders
– Wall Street Journal
 

Homebuyers and holders of Fannie Mae and Freddie Mac debt are the likely beneficiaries of a U.S. Treasury plan to takeover the beleaguered mortgage giants, but it is less clear how shareholders will fare.
 
  A capital infusion by the Treasury could harm investors in the firms’ common and preferred stock in the near term, but may ultimately prove a boon to shareholders if the companies rebound, analysts said.
 
  "If the companies are stabilized and the crisis passes, the stock will be worth a lot," Peter Wallison, former general counsel to the Treasury and a frequent critic of the firms, argued…..

Obama, McCain Back Treasury Action to Rescue Freddie, Fannie
- Bloomberg
 

Presidential candidates Barack Obama and John McCain gave their support for federal action to rescue Freddie Mac and Fannie Mae while saying steps must be taken to ensure the mortgage giants don’t keep passing losses off to taxpayers.
 
  “It looks like the Bush administration is going to intervene with a bailout that could end up costing taxpayers billions of dollars,” Obama, the Democratic nominee, said today while campaigning in Terre Haute, Indiana. “These entities are so big and they are so tied into the housing market that it’s probably true that we have to take steps to make sure that they don’t just collapse.”…..

Paulson readies the ‘bazooka’
- Fortune
 

It took two months, but the bond market called Henry Paulson’s bluff: The Treasury Secretary was widely expected this weekend to announce a plan to take Fannie Mae and Freddie Mac under government control. 

News reports say the mortgage giants will be placed under a "conservatorship" of their new regulator, the Federal Housing Finance Agency. The agency would likely temporarily run Fannie and Freddie and continue to implicitly back any liabilities until the two companies’ financial standing was strengthened……

Washington’s Fannie And Freddie Plan: Why Now?
- Forbes
 

Fannie Mae and Freddie Mac, the mortgage finance giants that fund half the U.S. housing market, are about to become subsidiaries of the U.S. government….
 
  Reports circulating Friday night have the two companies entering conservatorship, which would nearly wipe out equity holders but preserve the interests of debt holders. The chief executives of both companies would lose their jobs, but the companies could continue to operate, with quarterly infusions of capital from the Treasury depending on losses.
 
  Any announcement would come just weeks before the two companies have to refinance $225 billion of mostly short-term notes. Fannie and Freddie sell debt to investors regularly, but concern about their financial position threatens to scare away those needed buyers, many of them foreign banks. A solid federal guarantee would allay investor fears and allow Fannie and Freddie to continue to raise funds as needed….

Paulson Meets With Bernanke, Fannie, Freddie Chiefs
- Bloomberg
 

Treasury Secretary Henry Paulson met with regulators and executives of Fannie Mae and Freddie Mac today as the Bush administration prepared to announce a plan to prop up the firms hit by $14.9 billion in losses the past year.
 
  The plan is likely to involve putting at least one of the companies under government control in a conservatorship, according to a person briefed on the discussions. The move may also result in changes in the leadership of Fannie and Freddie, said the person who spoke on condition of anonymity. 

Pacific Investment Management Co., manager of the world’s biggest bond fund, and other large investors may put in their own money once the Treasury decides to inject government funds, said Newport Beach, California-based Pimco fund manager Bill Gross, in a Bloomberg Television interview….

U.S. Nears Rescue Plan For Fannie And Freddie
- Washington Post
 

The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives and prop them up financially, federal officials told the two companies yesterday, according to three sources familiar with the conversations.
 
  Under the plan, which could prompt one of the most sweeping government interventions in the workings of financial markets in U.S. history, federal officials would place the firms under a conservatorship, a legal status giving the government the option and time to restructure and revive the companies, the sources said. The value of the companies’ common stock would be diluted but not wiped out; while the holdings of other securities, including company debt and preferred shares might be protected by the government.
 
  Instead of giving each company a big capital infusion up front, the government could make quarterly injections as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue…..

 

Charles Tyrwhitt

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