Feds Outline Fannie, Freddie Bailout

Gov't will step in as conservator; Treasury will buy preferred stock
By Katherine Thompson,  Newser Staff
Posted Sep 7, 2008 11:28 AM CDT
Fannie Mae President and Chief Executive Officer Daniel Mudd will be departing as part of the bailout deal laid out by the Treasury Department and FHFA.   (AP Photo/Manuel Balce Ceneta, file)
camera-icon View 3 more images

(Newser) – Citing Fannie Mae and Freddie Mac as "critical to turning the corner on housing," Treasury Secretary Henry Paulson this morning announced a bailout of the beleaguered mortgage companies that includes his agency purchasing preferred stock, while the Federal Housing Finance Agency will step in as conservator. Additionally, Treasury is to buy mortgage-backed securities in the open market, and provide a lending facility, the Wall Street Journal reports.

While acknowledging inherent taxpayer risk in acquiring significant stakes in Freddie and Fannie, Paulson emphasized "the ultimate cost to the taxpayer will depend on the business results... To that end, the steps we have taken ... will improve the housing market, US economy, and GSEs' business outlook." Federal control over day-to-day operations has no set end point.