Paper: Feds mull $15B rescue of Freddie, Fannie
The Sunday Tmes of London is reporting that Treasury Secretary Henry Paulson is working on a $15-billion federal rescue of Fannie Mae and Freddie Mac that is considered so urgent it may be announced before the stock market opens Monday.
To be clear, The Times is not reporting that this rescue will definitely occur, saying the plan "is said to be high on a list of options being considered by regulators."
The Times: "U.S. Treasury Secretary Hank Paulson is working on plans to inject up to $15 billion of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms. ... Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders. ... Some in Wall Street believe a rescue plan may be announced ahead of (Monday's) US market opening to calm nerves and support the debt auction."
The New York Times, meanwhile, files a must-read what-went-wrong story about how Fannie and Freddie bullied their way into becoming way too big for anybody's good -- an "arrogant, two-headed monopoly," in the words of former Republican congressman Jim Leach. That's a strong quote, but not quite as strong as what Richard Baker said about the duo in 2002: "The gorilla has outgrown the cage, and we don't know what to do with him."
Your thoughts? Comments? E-mail story tips to peter.viles@latimes.com
$15 billion - that's it?
Seriously, if Paulson wants to give notice that Freddie/Fannie is stable, he has to stand firm, instead of throwing money around. That makes people think things are *worse*, and undercuts what he said just the other day, that Fannie/Freddie are just *fine*.
Monday morning is going to be bad enough with people making "wall street runs" on firms they think are worthless. They very likely are.
Posted by: Tombstone Realty | July 12, 2008 at 05:16 PM
UH-OH.
Could we see a 500 point drop in the Dow on Monday?
Posted by: Fred | July 12, 2008 at 05:16 PM
The Fed backstops $29 Billion for Bear Stearns, $4-$8 Billion more from the FDIC for IndyMac, and now $15 Billion for Freddie & Fannie from the Treasury.
Where does Paulson get the authority to invest that kind of money in two publicly traded companies? Something stinks!
Posted by: Mark Too | July 12, 2008 at 06:21 PM
Perhaps no industry has been hit harder by our country's "mental recession" than the mortgage banks, and two in particular, Fannie Mae and Freddie Mac, have been in the news lately after the Treasury Department hinted that it may bail them out. Although Treasury Secretary Henry Paulson said today that a bailout is not "on the horizon" (but is somewhere in the troposphere) that doesn't mean you should rush to your neighborhood Fannie Mae or Freddie Mac store and load up on subprime mortgages.
Or does it? And what's the deal with this couple? Who are they? Why should we give a hoot? Look no further than FAQ: Fannie Mae and Freddie Mac; http://www.236.com/news/2008/07/11/faq_fannie_
mae_and_freddie_mac_7677.php
Posted by: eliana | July 12, 2008 at 08:34 PM
Bend over and grab your ankles! The taxpayer gets screwed again. I can't even relinguish my citizenship without paying money..................
Posted by: Roger Ramjet | July 12, 2008 at 09:24 PM
Oh. Lord.
That Dan Bailey chump with the countrywide email from Mozilo is on the cover of the NYTimes.
What part of "adjustable" could the idiot not understand.
A-D-J-U-S-T-A-B-L-E
If you were a dumb-ass that thought that meant your payment would go DOWN...then you were hit with the stupid stick at birth and you deserve to lose your house.
Posted by: E | July 13, 2008 at 01:05 PM
I'm not surprised by this. But I am angered by it. First they say no bail out then turn right around and start bailing them out the next business day.
Posted by: F/C Master | July 14, 2008 at 01:52 AM