U.S. Lawmakers Reach Deal on Fannie, Freddie Bill

Discussion in 'Wall St. News' started by Xuanxue, Jul 22, 2008.

  1. Xuanxue



    July 22 (Bloomberg) -- U.S. lawmakers reached agreement on a rescue plan for Fannie Mae and Freddie Mac that the House may vote on tomorrow, Representative Barney Frank said.

    Under a modified version of proposals made by the Bush administration, the Treasury Department would gain authority to inject capital into the two largest U.S. mortgage finance companies, through loans and equity investments.

    The Treasury would be barred from providing aid that would cause a breach in the federal debt ceiling under the agreement, a constraint aimed at limiting any taxpayer losses. The plan would give Treasury Secretary Henry Paulson power to restrict the companies' ability to pay dividends and require regulatory approval of the salaries of top executives.

    ``The package we have got is fully acceptable to Treasury,'' along with lawmakers in the Senate, said Frank, a Massachusetts Democrat and chairman of the House Financial Services Committee. ``Nobody is for everything that's in it or got everything in it he wanted, but we negotiated a lot with the Treasury and the Senate.''

    Treasury spokeswoman Brookly McLaughlin didn't immediately respond to a phone call requesting comment.

    The legislation would raise the limit on the size of the mortgages the companies may purchase. The new cap would be $625,000, or the median home price plus 15 percent, whichever is lower, Frank said.

    Frank's counterpart in the Senate issued a statement indicating he backs the bill now progressing in the House.

    `Fruitful Discussions'

    ``We have been engaged in extensive and largely fruitful discussions with our counterparts in the House'' and with Bush administration officials, Democratic Senator Christopher Dodd said in a joint statement with Republican Senator Richard Shelby distributed by e-mail. ``We remain optimistic about the prospects for this legislation.''

    Dodd, of Connecticut, chairs the Senate Banking Committee and Shelby, of Alabama, is the panel's top Republican.

    Treasury Secretary Henry Paulson, who proposed a rescue program on July 13, reiterated today the plan is aimed at restoring investor confidence in the two companies.

    Fannie Mae has dropped about 45 percent in the past month, and Freddie Mac has tumbled about 60 percent, on concern the companies have insufficient capital to cover writedowns and losses amid the mortgage-market collapse.

    Pending Bill

    Lawmakers wrapped the plan into a housing bill that would create a program aimed to help an estimated 400,000 Americans with subprime home loans refinance into 30-year, fixed-rate mortgages backed by the government.

    The legislation includes tax breaks to help prop up the housing industry, including what would be the equivalent of an interest-free loan worth as much as $7,500 for first-time homebuyers.

    The Senate may vote on the legislation as early as July 24, said Jim Manley, a spokesman for Senate Majority Leader Harry Reid of Nevada. The bill would then go to President George W. Bush for final approval.

    A Congressional Budget Office estimate released today put the cost of Paulson's plan at $25 billion, a figure below the total that some lawmakers had expressed concern about.

    ``It's pretty good news -- a lot of people thought it would be much higher,'' Shelby said earlier today.

    Washington-based Fannie Mae and McLean, Virginia-based Freddie Mac own or guarantee about half of the $12 trillion in outstanding home loans.

    The companies, which buy mortgages from banks, face mounting losses stemming from the collapse of the subprime home loan market.

    Paulson wanted Congress to grant the Treasury temporary authority to buy stock in the companies and offer an unlimited federal credit line.
  2. more debt.. terrific
  3. unlimited power to treasury?
  4. imagine instead, we had a government that did not bail out ANYONE

    that did not rebuild beachfront or riverfront property that was destroyed by hurricanes or flooding

    that NEVER borrowed money for any reason

    that did not go rushing off to go to war and then occupy and rebuild other countries, but only delivered a devastating punch and LEFT.

    that only provided essential services - justice, international relations, basic defense, the truly needy, promoting job-creation...

    and then STOPPED.

    that did not provide retirement for govt workers, military personnel, social security, etc., etc.

    imagine not having $8 trillion in govt debt, $50 trillion in social security obligations

    the smallest possible govt.

    our taxes would be so low, we would not NEED most govt services.

    just IMAGINE...
  5. S2007S


    Of course, another day another bailout. Billions and billions of writedowns and yet they still open for business everyday.
  6. Are Fannie and Freddie buying up a substantial amount of the loans from the banks, or is this mostly aimed at originating new loans?
  7. I heard Barney Frank had a man date in congress.
  8. Digs


    .."Paulson wanted Congress to grant the Treasury temporary authority to buy stock in the companies and offer an unlimited federal credit line."..

    Dilution of capital, this is bad for current stock holders.

  9. poyayan


    Someone please shoot me..:(

    "The measure hands the Treasury Department the power to extend the government-sponsored mortgage companies an unlimited line of credit and buy an unspecified amount of their stock, if necessary, to prop up Fannie Mae and Freddie Mac, two companies chartered by Congress. The two companies back or own $5 trillion in U.S. mortgages -- nearly half the nation's total"

    Unlimited? You got to be kidding me.
  10. When this thing is finalized it's going to tank the market.
    #10     Jul 23, 2008