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September 6, 2008 11:16:35 PM CDT

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Feds Mull Possible Bailout for Freddie and Fannie

Posted Jul 10, 08 9:49 AM CDT in US,  Business 

(Newser) – With the shares of mortgage titans Fannie Mae and Freddie Mac plummeting to their lowest points in more than 15 years, the Bush administration is weighing what to do in the event of a collapse, reports the Wall Street Journal. No rescue plan is imminent—both companies are expected to be able to raise needed capital—but as home values continue to decline and more homeowners default, Treasury officials are studying contingency plans.

Options include a credit line from the Federal Reserve, a capital infusion from the government or an explicit federal guarantee of their $1.5 trillion in debt, analysts tell the Journal, though any of them would be likely to set off a political firestorm. Freddie's shares dropped 24% yesterday and Fannie's 13%; the former is off 83% from a year ago, and the latter 76%. "They can't be allowed to fail," said a former Treasury Department official. "There is simply no way that the United States government can let it happen."

Source Wall Street Journal

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The Fannie Mae building in Washington.   (AP Photo/Manuel Balce Ceneta)
Fannie Mae President and Chief Executive Officer Daniel Mudd.   (AP Photo/Manuel Balce Ceneta)
May Foreclosures Up Almost 50 Percent Compared To Same Month Last Year   (Getty Images)
In this March 15, 2008 file photo, a realtor's sign is seen on the lawn of a foreclosed home in Egg Harbor Township, N.J.   (AP Photo/Mel Evans, file)
A bank owned home is seen for sale in Sacramento, Calif., Wednesday, July 2, 2008. wners avoid foreclosure and gives tenants more time to move out of foreclosed property.   (AP Photo/Rich Pedroncelli)
A sign showing a foreclosed house is seen in Glendale, Calif. is seen in this August 20, 2007 file photo.   (AP Photo/Kevork Djansezian, file)
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Bush administration  • housing crisis  • Fannie Mae  • Freddie Mac  • Treasury Department


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