Report: Gov't may soon back Fannie, Freddie

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