US Sen Dodd:Fannie,Freddie Won't Be Reconstituted In Old Mold
January 13 2009 - 1:18PM
Dow Jones News
A key U.S. senator said Tuesday that Fannie Mae (FNM) and
Freddie Mac (FRE) won't be reconstituted in their old mold before
being thrown into conservatorship by the federal government.
"Fannie and Freddie will be very different," Senate Banking
Committee Chairman Christopher Dodd, D-Conn., told reporters.
He expressed cautious support for recreating the mortgage
finance giants under a public utility model, calling it "an
interesting concept."
The companies were seized by The U.S. Treasury Department and
their regulator, the Federal Housing Finance Agency, on Sept. 6
amid fears they would collapse from mounting mortgage defaults,
throwing the global financial system into turmoil. Treasury agreed
to pump as much as $200 billion as needed into the companies to
keep them solvent.
Congress is under pressure to decide the fate of Fannie and
Freddie because the Treasury backstop and a liquidity facility for
the companies expire at the end of the year.
Outgoing U.S. Treasury Secretary Henry Paulson has spoken
favorably about reconstituting the companies as public utilities.
Under such a model, Fannie and Freddie would remain
shareholder-owned but be subject to oversight by a commission that
could cap the companies' profitability.
Private shareholder-owned companies, Fannie and Freddie long
enjoyed lucrative ties to the government that allowed them borrow
money cheaply. Critics charge those ties led them to grow
recklessly and stray from their core mission of providing liquidity
to the mortgage market.
-By Jessica Holzer, Dow Jones Newswires; 202-862-9228;
jessica.holzer@dowjones.com
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