July 14, 2008 – 1:47 p.m.
Congressional leaders Monday were studying the Bush administration’s plans to bolster confidence in beleaguered mortgage finance giants Fannie Mae and Freddie Mac, aiming for quick action.
“I think what the secretary of Treasury has proposed is reasonable. It’s a kind of a reassurance to people that help will be there even though we don’t think it’ll be needed,” House Financial Services Committee Chairman
In separate Sunday announcements, the Treasury Department and Federal Reserve said unveiled plans to backstop the companies if necessary. Fannie and Freddie have seen their share prices plummet in recent weeks, as nervous investors fretted that the companies could be significantly damaged by the housing slump.
As government-sponsored enterprises, markets have long considered Fannie and Freddie to have an implied government guarantee.
Treasury will ask Congress for the authority to increase an already existing government line of credit to Fannie and Freddie, as well as the temporary authority to buy equity in either company to ensure the financiers have access to sufficient capital.
At the same time, the Bush administration wants to include the Federal Reserve in a “consultative role” as part of a new regulator that Congress is considering establishing.
A landmark housing package now moving through Congress would establish a strong new federal regulator for Fannie and Freddie with broad authority to set capital requirements and limits on the companies’ mortgage portfolios. The housing package also includes a $300 billion expansion of the Federal Housing Administration’s insurance programs aimed at helping borrowers avoid foreclosure, among other provisions.
The current package, which the Senate bounced back to the House on Friday, represents a compromise hammered out by Senate Banking Chairman
Dodd said the first stop in any rescue plan should be clearing the housing package. He said he has asked administration officials to explain their plans at a panel hearing on Tuesday.