Paulson Announces GSE Initiatives
Washington, DC-- Treasury Secretary Henry M. Paulson, Jr. issued the following statement:
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.
ENDS