Paulson Plan on Mortgage Giants Fannie and Freddie (FNM, FRE) Expected This Weekend

September 6, 2008 12:48 PM EDT

After months of speculation, Henry Paulson and the U.S. Treasury are said to be putting the finishing touches on a plan to shore up Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE), putting the two mortgage giants into a conservatorship with the Federal Housing Finance Agency. The plan could be announced this weekend.

Under the plan, the U.S. government will inject much-needed capital in both struggling entities. The plan is also likely to include a management shake-up, with Fannie Mae CEO Daniel Mudd and Freddie Mac chief Richard Syron both stepping down.

In July, Congress passed aggressive Paulson-backed legislation to help the two struggling companies as home foreclosures and late payments continue to surge, eating away at the companies balance sheets and making investors and holders of the companies securities and debt very nervous. A number of foreign banks and governments hold Fannie and Freddie paper.

Common shareholders of both companies will not likely fair well in the government takeover. Shares of Fannie and Freddie fell 20% in after-hours trading Friday on word the CEOs of both companies met with officials from the Federal Housing Finance Agency, Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson to talk about the bailout plan. Shares of both companies are down 90% over the past year.

Related Categories

Hot List
Insiders' Blog
Rumors

Stocks Mentioned

Related Entities

• Henry Paulson
• Ben S. Bernanke

Comments

Add Your Comment

Name

Subject

Body

Verification can't see the text?
click here to refresh the image.
what's this?