leftchick
09-07-2008, 10:45 AM
http://www.mcclatchydc.com/homepage/story/51965.html
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — The historic seizure Sunday of mortgage finance titans Fannie Mae and Freddie Mac is expected to bolster the nation's sinking housing sector by lowering mortgage rates and jump-starting the obscure background market that is vital to home lending.
Treasury Secretary Henry Paulson announced in a Sunday morning new conference that the government was seizing Fannie Mae and Freddie Mac on the grounds that their weak accounting standards and ambiguous role as quasi-public enterprises posed a growing threat to global financial markets.
"We examined all options available, and determined that this comprehensive and complimentary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said.
Fannie and Freddie will continue to operate as normal but under conservatorship, a process similar to a Chapter 11 bankruptcy, where a business is allowed to restructure its operations. Treasury will purchase Fannie and Freddie bonds in the open market to boost home lending, will provide a special lending fund to help weather any future financial storms and will eliminate the dividend on Fannie and Freddie's common and preferred stock.
James Lockhart, chief of the Federal Housing Finance Agency, which regulates the two entities, appointed private sector bankers to head Fannie and Freddie.
"Their compensation will be significantly lower than the outgoing CEOs'," said Lockhart, citing a frequent criticism of the for-profit entities that enjoyed implicit U.S. government backing.
Herb Allison, who was chairman of retirement-plan administrator TIAA-CREF, will now run Fannie Mae. David Moffett, who was the chief financial officer of U.S. Bancorp up until last year, will head Freddie Mac. He is a senior adviser to private equity giant The Carlyle Group, and his appointment suggests the Bush administration sees these entities privatized eventually.
The Treasury Department in late July was given by Congress additional powers to inject money into Fannie and Freddie, but Paulson determined an actual takeover would calm nervous markets.
He was supported Sunday by Federal Reserve Chairman Ben Bernanke, who in a statement said the action "will provide critical support for mortgage markets in this period of unusual credit-market uncertainty."
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — The historic seizure Sunday of mortgage finance titans Fannie Mae and Freddie Mac is expected to bolster the nation's sinking housing sector by lowering mortgage rates and jump-starting the obscure background market that is vital to home lending.
Treasury Secretary Henry Paulson announced in a Sunday morning new conference that the government was seizing Fannie Mae and Freddie Mac on the grounds that their weak accounting standards and ambiguous role as quasi-public enterprises posed a growing threat to global financial markets.
"We examined all options available, and determined that this comprehensive and complimentary set of actions best meets our three objectives of market stability, mortgage availability and taxpayer protection," Paulson said.
Fannie and Freddie will continue to operate as normal but under conservatorship, a process similar to a Chapter 11 bankruptcy, where a business is allowed to restructure its operations. Treasury will purchase Fannie and Freddie bonds in the open market to boost home lending, will provide a special lending fund to help weather any future financial storms and will eliminate the dividend on Fannie and Freddie's common and preferred stock.
James Lockhart, chief of the Federal Housing Finance Agency, which regulates the two entities, appointed private sector bankers to head Fannie and Freddie.
"Their compensation will be significantly lower than the outgoing CEOs'," said Lockhart, citing a frequent criticism of the for-profit entities that enjoyed implicit U.S. government backing.
Herb Allison, who was chairman of retirement-plan administrator TIAA-CREF, will now run Fannie Mae. David Moffett, who was the chief financial officer of U.S. Bancorp up until last year, will head Freddie Mac. He is a senior adviser to private equity giant The Carlyle Group, and his appointment suggests the Bush administration sees these entities privatized eventually.
The Treasury Department in late July was given by Congress additional powers to inject money into Fannie and Freddie, but Paulson determined an actual takeover would calm nervous markets.
He was supported Sunday by Federal Reserve Chairman Ben Bernanke, who in a statement said the action "will provide critical support for mortgage markets in this period of unusual credit-market uncertainty."