This is likely what Wall Street has been waiting for. The Treasury Department is announcing a rescue plan today for the nation's two big mortgage finance companies that's short of an outright bailout or takeover. As part of the plan, Congress will be asked to give the government the authority to buy billions of dollars in stock in Fannie Mae and Freddie Mac. Separately, the Federal Reserve voted on Sunday to open a lending facility for Fannie Mae and Freddie Mac, if they need emergency capital. From the NYT:
The administration will also call on Congress to raise the national debt limit, people briefed on the plan said. And it will ask Congress to give the Federal Reserve a role in setting the rules for how big a capital cushion each company must hold. Giving the Fed a consulting role in the companies’ oversight is seen as yet another way to reassure nervous markets.
Announcement of the plan on Sunday evening was intended to send a sharp signal to both stock markets and debt markets that the government was standing behind the beleaguered companies. Throughout the weekend, senior officials from the Treasury and the Federal Reserve closely monitored preparations by Freddie Mac to raise money help meet its short-term funding needs. Top officials spent Saturday and Sunday being briefed on Wall Street’s appetite for a $3 billion debt offering by Freddie Mac that was set for Monday. Officials said they were watching to see if the steep declines last week of Freddie and Fannie stock would spill into the debt market and undermine the confidence of lenders.
Some other stories:
Paulson Statement on Freddie Mac, Fannie Mae (Bloomberg)