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Paper: Feds mull $15B rescue of Freddie, Fannie

July 12, 2008 |  4:35 pm

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."

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