Sunday, July 13, 2008

TREASURY SEC'TY PAULSON ANNOUNCES BUSH ADMIN'S "RESCUE PLAN" FOR FANNIE/FREDDIE

Here's the bailout we promised you:

Alarmed about the sharply eroding confidence in the nation’s two largest mortgage finance companies, the Bush administration will ask Congress to approve a rescue package that would give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac and also lend to the companies to meet their short-term funding needs, those briefed on the plan announced on Sunday.

Housing just went Socialist--but not in a good way. Comrade Paulson and the Bush Robberbarons have now made us all propertyowners by saddling us with the debt of these irresponsible Government Sponsored Enterprises and the greedy investors they backed.

Stay tuned. It's going to be a historic week.

UPDATE #1:
8pm EST
FULL TEXT of Paulson's Remarks:

Paulson Statement on Freddie Mac, Fannie Mae: Full Text
July 13 (Bloomberg) -- Following is the text of a statement issued today by Treasury Secretary Henry Paulson:

Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.

GSE debt is held by financial institutions around the world. Its continued strength is important to maintaining confidence and stability in our financial system and our financial markets. Therefore we must take steps to address the current situation as we move to a stronger regulatory structure. In recent days, I have consulted with the Federal Reserve, OFHEO, the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately.

First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.

Second, to ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed.

Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer. Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.

I look forward to working closely with the Congressional leaders to enact this legislation as soon as possible, as one complete package.

Courtesy of Bloomberg.

4 comments:

Montpellier said...

Oh Boy...here it comes! Now we're all gonna get reamed - to bail out spec-vestors and REALTORs.

Perhaps the flippers and specu-vestors will finally get the message: it's over - you're high risk "investment" (gamble?) went sour on you. It's time to take your medicine and eat some losses. Cut your prices!!!

This is the final straw - make no mistake - new lending standards are coming - that means prices will be reverting to what is truly affordable.

Montpellier said...

OMG - I'm illiterate!

"you're" should be "your"!

This just about kills the snark.

Yes, I am a grammar nazi as well as a snarkalicious housing bear. Pedantic elitism is a multi-faceted personality trait.

Dave Phillips said...

Monty, that's hilarious. I'm sure you'd like to take a red pen to my ramblings quite often. Perfection never is (how's that for bad grammar).

Matt S. said...

The market was not impressed... totally blew off this government "save" and dropped financials 5% to new lows. Dollar at new lows.

The Great Unwind may jump to a new level of intensity now. Will the gov really throw the dollar out the window and take the hyperinflation route? Congress looks just dumb enough to force it, in which case, ready up for GD II next year.