Friday, September 5, 2008

Government Takeover of Freddie and Fannie

Senior officials from the Bush administration and the Federal Reserve informed top executives of Fannie Mae and Freddie Mac that the government is preparing a plan to seize the two companies and place them in a conservatorship, officials and company executives briefed on the discussions told NYT.


UPDATE: Sounds like Freddie and Fannie will be run on an interim basis by the Federal Housing Finance Agency.

UPDATE 2: From WaPo:

The value of the company's common stock will be diluted but not wiped out while the holdings of other securities, including company debt and preferred shares, will be protected by the government...

Instead of giving each company a big capital infusion up front, the government plans to make quarterly infusions as the companies' losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue...

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