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Paulson Lays Out Plans for Fannie, Freddie Bailout

WASHINGTON, DC-The Treasury department's plan to backstop Fannie Mae and Freddie Mac may help for now, but the tertiary effects will be felt deeper.

By Erika Morphy | Updated on July 13, 2008

WASHINGTON, DC-Treasury Secretary Henry Paulson has laid out plans to help staggering giants Fannie Mae and Freddie Mac navigate their capital crises and shore up the $12 trillion in US mortgages the GSEs provide to the multifamily market.

According to a Treasury department statement, the governmental bolster, pending approval, will include a temporary increase in the GSEs’ line of credit with Treasury, the ability for the department to purchase equity into the company, and legislation to provide the Treasury department with an increased role in overseeing and regulating GSEs. The plan will include a series of terms and conditions to protect taxpayers. There was doubt to the destiny of the faltering GSEs, although the announcement of the plan has already helped Freddie and Fannie’s stock this morning.

As late as Friday, the CRE community was bracing for bad news; even if Fannie and Freddie are able to avoid the worst case scenarios, it is more than likely that their support for multifamily sales and acquisitions will not be as aggressive as they have been since the beginning of the credit crunch.

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