Raines said that Fannie Mae would issue the notes as frequently as every quarter during the course of 2001, and on at least a semi-annual basis thereafter. The company expects to issue as much as $15 billion worth of the notes over the three-year phase-in period that ends at the close of 2003.

Fannie Mae appointed Morgan Stanley Dean Witter as advisor and arranger, and chose Goldman, Sachs & Co., Morgan Stanley Dean Witter and Salomon Smith Barney as joint-lead managers for the inaugural transaction expected in early 2001. Fannie Mae's Subordinated Benchmark Notes have received a prospective rating of Aa2 from Moody's Investor Services and an expected rating of AA-from Standard & Poor's.

Timothy Howard, Fannie Mae's CFO, said that the new notes would be in addition to, and not a substitute for, core capital. He noted that the they would provide an additional loss absorbing capital layer, and that their trading level would be an early warning signal of the market's perception of the company's financial strength.