U.S. federal regulators, in a dramatic move highlighting the tenuous state of global credit markets, have outlined a takeover of Fannie Mae and Freddie Mac including giving control of the firms to their regulator and allowing the Treasury Department to purchase billions of dollars of the firms’ senior preferred stock.
The plan, offered jointly by the Treasury Department and Federal Housing Finance Agency, also gives the Treasury authority to purchase mortgage-backed securities from the firms in the open market and a lending facility through the Treasury from its general fund held at the Federal Reserve Bank of New York.
Treasury Secretary Paulson acknowledged that the radical proposal does pose risks for U.S. taxpayers, giving the U.S. government a “large stake in the future value of these entities.”
“In the end, the ultimate cost to the taxpayer will depend on the business results of the GSEs going forward,” Mr. Paulson said. “To that end, the steps we have taken…will together improve the housing market, the U.S. economy, and the GSEs’ business outlook.”
The takeover bounced Fannie’s CEO Daniel Mudd and Freddie Chairman CEO Richard Syron. A couple of winners whose combined take exceeds the GNP of most nations.
Other changes include an immediate suspension of the two firms’ political activities — including all lobbying…
The two firms own or guarantee about $5.4 trillion of U.S. home loans, about half the total outstanding loans in the country.
Should pretty much guarantee an increase in the national debt by $12-14 trillion after eight years of corporations padding their balance sheets with blessings from neocon voodoo economists. Trickle-down theories which ensure most of us are in the yellow puddle underneath the trickle.