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The end of Fannie and Freddie?

Discussion in 'BBS Hangout: Debate & Discussion' started by robbie380, Jul 7, 2008.

  1. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    The 2 stocks were absolutely crushed today from valid worries about changes to accounting rules that may force Freddie to raise $29 billion and Fannie to raise $46 billion. Is the market finally coming to grips with the reality that these companies are bankrupt as many have been saying for awhile now? Will Fannie and Freddie get exemptions from the rules?

    http://biz.yahoo.com/rb/080707/freddiemac_fanniemae_shares.html?.v=1

    Reuters
    Freddie Mac, Fannie Mae shares pummeled
    Monday July 7, 9:27 pm ET
    By Al Yoon

    NEW YORK (Reuters) - Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News) shares plunged to their lowest in nearly 16 years on Monday while costs to insure their debt against default rose on concern the two largest U.S. mortgage funders may need to raise vastly more capital amid larger-than-expected losses.

    Corporate "federal agency" debt obligations and mortgage-backed securities guaranteed by the companies also plummeted relative to government debt as investors reduced positions in response to the latest worries, analysts said.

    Monday's carnage was only the latest setback for Fannie Mae and Freddie Mac, which each have lost more than three-quarters of their stock market value since last August when a crisis initially believed contained to the subprime mortgage market erupted into a global credit crisis.

    Freddie Mac's stock tumbled nearly 18 percent in New York trading to close at $11.91, the lowest close since November 1993, while Fannie Mae shares dropped more than 16 percent, to end at $15.74, their lowest since July 1992. Their credit default swaps, meanwhile, rose 7 basis points to 82 basis points, meaning it costs $82,000 a year to protect $10 million of their debt for five years, according to data from Phoenix Partners Group.

    The shares crumbled after a Lehman Brothers report said a pending accounting change could force Freddie Mac and Fannie Mae to raise an enormous amount of capital at a difficult time. The rule aimed at forcing companies to account for securitized assets on their balance sheets could mandate Freddie Mac and Fannie Mae to boost capital by $29 billion and $46 billion, respectively, the analysts wrote in a client note on Monday.

    In a caveat, Lehman's analysts, led by Bruce Harting, said the companies may get exemptions given the gravity of the impact on the fragile U.S. housing market.

    But the downturn in prices of risky mortgage assets held by Freddie Mac and Fannie Mae as the credit crisis worsened has also boosted chances for greater losses, analysts said. Prices on some subprime bonds hit record lows last week, gauging from derivative indexes.

    The accounting issue "piled on to other folks' previous estimates that the companies might be forced to take (losses)" on subprime and other risky mortgage assets, said Thomas Lawler, a former Fannie Mae portfolio manager and founder of Lawler Economic & Housing Consulting in Leesburg, Virginia.

    Accounting issues would add to the difficulties facing the two government-sponsored enterprises. Both have been struggling to strike a balance between stabilizing the ailing U.S. housing market while protecting themselves from deeper losses. Congress has stepped up pressure on the companies to raise capital in order to complete what they call their "mission" of serving American homeowners.

    The GSEs have raised billions of dollars in capital to run their businesses and offset more than $12 billion in combined losses since June. Both have said they do not expect improvement in housing until 2009.

    Meanwhile, their equity investors have lost a collective $89 billion as their stock market values have tanked since the crisis erupted last August -- $36.9 billion for Freddie and $52.1 billion for Fannie.

    Both companies will need to raise more capital, but the accounting rule that would upend their businesses "has a "snowball's chance in hell of happening," Lawler added.

    The views of analysts may foreshadow a challenge to the Financial Accounting Standards Board, since Chairman Robert Herz has said FASB is increasingly saying "no" on exceptions.

    Concerns that Freddie Mac could suffer greater losses from mortgage insurance were also fueled on Monday after research firm CreditSights said the mortgage insurance unit of Radian Group (NYSE:RDN - News) could face more downgrades, forcing it to wind down its existing business. That increases risks for Freddie Mac, which had $63 billion of loans or pools of loans backed by Radian as of March 31.

    Greater-than-expected losses and share declines at Freddie Mac would make it more difficult for the McLean, Virginia-based company to raise capital it needs to continue its business of buying and guaranteeing a huge chunk of U.S. mortgages, said James McGlynn, a portfolio manager at Summit Investment Partners in Southlake, Texas.

    A Freddie Mac spokeswoman said the company does not intend to raise capital until it announces second-quarter earnings, and declined to comment on the ability to raise capital as shares fall. The timing disappointed analysts since the company announced in May it would raise $5.5 billion.

    Fannie Mae spokesmen declined to comment on the Lehman accounting note.

    Yield premiums in the $4.5 trillion market for mortgage bonds backed by Fannie Mae and Freddie Mac jumped as their stocks made new lows. The additional yield on Fannie Mae MBS paying 6 percent interest increased by 9 basis points to 1.98 percentage points above the benchmark Treasury note.

    Investors have shunned MBS over the last month on concern that stressed financial institutions -- including Fannie Mae and Freddie Mac -- would slow purchases or sell MBS.

    Yield spreads on 10-year unsecured debt issued by Fannie Mae and Freddie Mac to fund their $1.5 trillion in mortgage investments gapped 8 basis points wider to the mid-90s.

    "Fannie Mae and Freddie Mac are ground zero for mortgages," said Steve Persky, chief executive at Dalton Investments in Los Angeles. "They're the largest leveraged owners of mortgages out there, and that's not a good position to be in right now."

    (Additional reporting by Emily Chasan, Dan Wilchins, Jonathan Stempel and Jennifer Ablan; Editing by Dan Grebler)
     
  2. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    http://www.businessweek.com/investor/content/jul2008/pi2008077_049649.htm?campaign_id=yhoo

    Fannie, Freddie Sink on Capital Concerns

    An analyst suggests that a new accounting rule will require the mortgage providers to raise huge amounts of cash

    by David Bogoslaw

    Fears that Fannie Mae (FNM) and Freddie Mac (FRE) could be forced to raise as much as $75 billion in additional capital sent shares of both mortgage backers plunging on July 7 and helped derail a rally in the stock market. Fannie's shares fell 16.2% to close at 15.74, while Freddie's shares fell 17.9% to end at 11.91.

    The rout followed a warning in a note from Lehman Brothers Equity Research (LEH) that the Financial Accounting Standards Board (FASB) is considering a new rule that may include removing the qualified special-purpose entity concept from what's known as FAS 140. That would have the effect of requiring off-balance-sheet assets to be brought onto balance sheets, and could force the two government-sponsored enterprises, or GSEs, to raise huge new sums of money to meet capital requirements.

    That could have devastating implications for the U.S. housing market, whose extended slump has yet to hit bottom, since Fannie and Freddie are the largest providers of financing for home mortgages in the U.S. Fannie Mae currently has $2.27 trillion of off-balance-sheet mortgage-backed securities and Freddie Mac has $1.42 trillion of them. If they were forced to bring off-balance-sheet assets onto their balance sheets, Fannie's minimum capital requirements would jump by more than $46 billion, and Freddie would need to raise $29 billion in additional capital.
    Exemption from Rule Change Likely

    Investors bolted at the news, even though Lehman analyst Bruce Harting also said in his July 7 note that the very size of the impact on Fannie and Freddie probably means they would be exempted from having to comply. "We think it's likely the GSEs will be granted an exemption because a literal interpretation of their minimum capital requirements would suggest that the GSEs would become significantly undercapitalized, and it would be very difficult for them to raise the capital needed," Harting said in his note.

    Since it wouldn't be in anyone's interest for the companies to be saddled with overwhelming capital requirements at a time when the market most needs them to buy mortgages, and when the capital markets and the economy are in such fragile shape, "we believe calmer heads [at the FASB and other financial industry regulators] will ultimately prevail," the note said.

    Paul Miller, an analyst at Friedman Billings Ramsey (FBR) in Arlington, Va., says everything he's heard from numerous discussions about the potential rule change suggests Fannie and Freddie would be spared. To require them to comply with the capital requirements "would be effectively nationalizing the companies," he said, forcing them to be taken over by the federal government.

    The real target of the accounting rule change, which could come by the end of 2008, is credit-card issuers that rely on off-balance-sheet trusts, analysts say. Lehman's Harting said in his note he doesn't "believe there will be a need for a reserve build on the loans brought on balance sheet, nor should there be any additional reserve need except for incremental growth to the entire portfolio."
    Still Need to Raise Capital

    However, Miller says Fannie and Freddie deserve to be trading at their current levels, even if Wall Street is miscalculating the ramifications of an accounting rule change. Both companies still need to raise capital, he says. The value of Freddie shares has been cut in half since May, when the company said it needed to raise $5.5 billion in capital.

    "It becomes very dilutive to earnings every day they don't raise capital," Miller says. Freddie has delayed issuing a combination of common and preferred stock to raise the $5.5 billion until it resolves some past accounting issues with the Securities & Exchange Commission, Miller says.

    Miller is urging investors to stay away from the GSEs despite their ultra-cheap valuations and has underperform ratings on both stocks. Harting at Lehman conceded that his upgrade of the GSEs to an overweight rating last November had turned out to be wrong or much too premature, but he reaffirmed his view that the companies' growth in profit and franchise value "should produce returns that make today's price look compelling." (Lehman Brothers has provided investment banking services to both companies within the past year.)
     
  3. lpbman

    lpbman Member

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    Bailout bound... quick, Ben, print 4 trillion dollars!

    Actually this is over my head and I don't know what the hell this is saying exactly.... Anyone care to give a layman's explanation?

    Oh, and "vastly more capital"? wha....?
     
  4. MadMax

    MadMax Contributing Member

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    Feds could guarantee up to 90% of each troubled loan. Then there'd be a market for them..and for working them out.
     
  5. lpbman

    lpbman Member

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    Another naive post:

    At what point does the Federal Government itself run out of credit for these guarantees?

    Goldman got 30 billion for taking Bear Sterns, GM and a few airlines might be next... and I don't think we've seen the end of the banks declaring bankruptcy judging by the activities in the FDIC. lets not even discuss the deficit spending these last 8 years

    How long can this continue? Is there a formula based on GDP that can give an idea or is it too complicated for that?
     
  6. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    it's basically saying that fannie and freddie have continued their practices of lying. they are using some bs accounting rules to make it seem like they have more money than they really have.
     
  7. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    who knows...i have been wondering myself. the fed is running out of money and the fdic doesn't even have enough money to guarantee everything.
     
  8. Refman

    Refman Contributing Member

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    Many of you know that I practice in comsumer bankruptcy court, Most of the Chapter 13 cases filed cure mortgage arrearages.

    What I have noticed over the last 6 months or so is that, in the main, mortgage servicers are working out loan modification agreements much more frequently than we have seen before. They are doing things in the modifications that we almost never saw before. They are lowering interest rates, etc.

    Fannie Mae and Freddie Mac are somewhat limited in the loan mods that they can work out. Their loan portfolios are disproportionately FHA, HUD, and VA underwritten. Therefore, any loan mods that are worked out must be done in accordance with the regulations of whichever government entity has guaranteed the loan. This makes it very difficult to get a loan mod done that is feasible for the debtor.

    Further complicating things is the servicer and tax ramifications versus default servicers, but that is an entire paper on its own.
     
  9. Air Langhi

    Air Langhi Contributing Member

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    If the gov't bailed out BSC how can they let Freddie and Fannie mae die. I mean are we only going bail out the companies that help the rich?

    The gov't says every deserves a home which is BS. If you can't afford it don't buy one.
     
  10. Air Langhi

    Air Langhi Contributing Member

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    How can the Fed run out of money? They own the printing presses. I think this is a great time to load up on good financials.

    GS looks real good at 170 even though I hate that company and hope it goes bankrupt.
     
  11. rhadamanthus

    rhadamanthus Contributing Member

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    As good a thread as any for this tidbit of congressional pandering.

    Not a fan of this move.
     
  12. randomdude

    randomdude Member

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    JP Morgan*
     
  13. lpbman

    lpbman Member

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    Yeah thats what I meant lol. OT but did anyone see the Charlie Rose interview with Jamie Dimon last night?

    Dude is sharp, and had some interesting things to say.
     
  14. Dubious

    Dubious Contributing Member

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    I've been told (by an economics professor in 1979 I think) since fiat money has no intrinsic value, the government can print all the money it wants forever. The consequences are inflation and international devaluation. If the US wanted to pay off all it's national debt if could print up some billion dollar bills and hand them out to the bond holders.

    Of course the exchange rates would start looking like the US was Zimbabwe.
    And since the Yuan is pegged to the dollar....? It's over my head.

    But what I do understand is how wealth has been built in The US by allowing banks to lend more than there assets on hand, It the basis of our whole economy and FHMA and GNMA are the foundation of home lending, so even though we let some greedy idiots run out quasi-public corporation, we can't afford to let them go under. They will get bailed out, the banks will make money and the national debt will go higher.
     
  15. deepblue

    deepblue Member

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    Fannie and Freddie notes are already implicitly guaranteed by the US government. There is no chance they will be allowed to sink. Agencies are the only thing that's active in the mortgage back security market right now. Take that away,you might as well declare the whole thing dead.

    Their loans are not bad (the bailout program loan might be), their notes are an important part of many investors' portfolio (US and foreign), this is not the time to clean house.
     
  16. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    their leverage is what is bad. they are claiming things like potential tax credits on future earnings (very very lofty future earnings) as assets to back up the capital they are leveraged into.
     
  17. deepblue

    deepblue Member

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    Don't think their leverage is as bad as people making it out to be, and this certainly is not the time to come down on them.
     
  18. halfbreed

    halfbreed Contributing Member

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    The fed bailout of BSC, regardless of whether you think it was right or not, helped a lot more than just the rich.
     
  19. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    well both stocks crashed back down to lows today after debt costs skyrocketed


    http://biz.yahoo.com/ap/080709/fannie_freddie_capital.html?.v=2

    AP
    Fannie, Freddie sink on capital concerns
    Wednesday July 9, 4:42 pm ET
    By Alan Zibel, AP Business Writer
    Shares of mortgage finance giants Fannie Mae and Freddie Mac drop on concerns about capital


    WASHINGTON (AP) -- Shares of Fannie Mae and Freddie Mac tumbled Wednesday amid continuing fears the mortgage finance companies will be forced to sell more new shares than anticipated to compensate for losses from the housing slump.

    The two government-chartered companies have been operating under a cloud of uncertainty in recent weeks, and their shares have plunged to levels not seen since the early 1990s.

    Freddie Mac shares fell $3.20, or 23.8 percent, to $10.26 Wednesday after earlier sinking to a 16-year low of $9.88. Shares of Fannie Mae fell $2.31, or 13.1 percent, to $15.31.

    "There's a lot of nervousness about whether or not they have adequate capital to withstand the credit crisis," said Fox-Pitt Kelton analyst Howard Shapiro, adding that he is "pretty comfortable" that the companies' planned and completed capital-raising efforts will be enough to offset losses on defaulted mortgages

    Others on Wall Street are more anxious. Reflecting those worries, Fannie Mae had to pay a record-high cost to complete a $3 billion debt offering Wednesday.

    The two-year offering, one of the primary ways the company raises money to fund purchases of home loans, will pay investors a 3.72 percent yield, or 0.74 percentage points above the comparable Treasury securities. That was the widest spread since the two-year offering started in 2000.


    Earlier in the week, concerns surfaced that an accounting rule change would force Fannie and Freddie to raise as much as $75 billion in new capital. While those concerns subsided Tuesday amid reassurances from the companies' chief government regulator, fears remain that housing troubles will continue to worsen, forcing Fannie and Freddie to sell so many shares that existing investors would see the value of their existing stake decline.

    While the government is widely expected to stand behind Fannie and Freddie's debt should the companies be unable to meet their obligations, analysts say shareholders could be wiped out in the event of a severe crisis.

    Investors are finally realizing that the housing market's troubles are not confined to subprime loans made to borrowers with poor credit and will increasingly affect loans bought or guaranteed by Fannie and Freddie, said Joshua Rosner, managing director of research firm Graham, Fisher & Co.

    "There's an increasing recognition that as they have to raise capital, investors are going to be diluted," Rosner said.

    For traders -- known as short-sellers -- who make bets that Fannie and Freddie's share prices will fall, fears about the companies' capital-raising plans become a self-fulfilling prophecy because that process gets more expensive as a company's share price drops, noted Frederick Cannon, chief equity strategist with Keefe, Bruyette & Woods Inc.

    "If shorting the stock works, it works better all the time," he said.

    Washington-based Fannie Mae raised more than $7 billion earlier this year to fortify its balance sheet. McLean, Va.-based Freddie Mac plans to raise $5.5 billion, but has been waiting to initiate the offerings because its stock is not yet registered with the Securities and Exchange Commission.

    The company had been exempted from SEC registration due to its status as a government-chartered company. Freddie had proposed to register with the SEC in 2002, but that process was put on hold due to a multibillion-dollar accounting scandal that came to light in 2003.
     
  20. robbie380

    robbie380 ლ(▀̿Ĺ̯▀̿ ̿ლ)
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    maybe someone will believe it can happen...


    http://online.wsj.com/article/SB121564782376340951.html?mod=hpp_us_whats_news

    U.S. Mulls Future of Fannie, Freddie
    Administration Ramps Up Contingency
    Planning as Mortgage Giants Struggle
    By JAMES R. HAGERTY, DEBORAH SOLOMON and DAMIAN PALETTA
    July 10, 2008; Page A1

    The Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter, according to three people familiar with the matter, as the stock prices of both companies continue to fall sharply.

    These discussions have been going on for months and are part of normal contingency planning that the Treasury Department and other financial regulators regularly undertake. The talks have become more serious recently given the financial woes of the shareholder-owned, government-chartered companies, whose stability is vital to the functioning of the nation's housing market, these people say.

    The government doesn't expect the entities to fail and no rescue plan is imminent, these people said. Government officials and market analysts expect both companies will be able to raise large amounts of capital relatively easily. Treasury officials are nonetheless talking about what the government could -- or should -- do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating.

    On Wednesday, Freddie shares fell 24% to close on the New York Stock Exchange at $10.26. Fannie shares dropped 13% to $15.31. For both companies, it was the lowest close in more than 15 years. Fannie's share price is down 76% from a year ago and Freddie is down 83%.

    The shares of the two companies have plummeted for several reasons. Investors are worried they will suffer bigger losses as housing prices continue to fall and mortgage defaults rise. Stock-market investors are also worried they will need to raise significant amounts of capital to cover those losses. For stock investors, that means the value of their ownership stakes in the company will be cut. Bond investors continue to lend to both companies, though they are also demanding slightly higher interest rates.

    Fannie and Freddie's decline helped drag the broad stock market into bear market territory Wednesday. The blue-chip Dow Jones Industrial Average, already in a bear market, tumbled 236.77 points, or 2.1%, to 11147.44. The Standard & Poor's Composite Index of 500 stocks, which includes Fannie and Freddie, had hovered above the 20% decline that marks a bear market but broke through on Wednesday, falling to 20.5% below its peak, and to its lowest point since July 21, 2006.

    Fannie and Freddie's health is of deep concern to policy makers because of the critical role they play in the housing market. The two companies own or guarantee about $5 trillion of mortgages or nearly half of all U.S. home-mortgage debt outstanding. The government has increasingly leaned on the companies to provide critical stability to a housing market crippled by falling home prices and banks too nervous to lend.

    If a loss of confidence among investors made it impossible for Fannie and Freddie to continue supporting the mortgage market, "the government would have to step in," said Douglas Elmendorf, an economist at the Brookings Institution in Washington.

    "They can't be allowed to fail," said Peter Wallison, a former Treasury Department general counsel. "The losses would extend through so much of our economy, and so much of the world economy. There is simply no way that the United States government can let it happen."

    Both Fannie and Freddie declined to comment on the government discussions.

    It's unclear what the government might do to either forestall or mitigate any potential problems. Treasury Secretary Henry Paulson has said in the past the government will not back the debt of Fannie and Freddie.

    Options mentioned by analysts include a credit line from the Federal Reserve, an equity investment by the government or an explicit federal guarantee of the mortgage companies' $1.5 trillion in debt.

    The most likely scenario is that Fannie and Freddie will raise capital from private investors, even though that will dilute the interests of current shareholders, said Josh Rosner, an analyst at Graham Fisher & Co., a New York research boutique.

    So far, the companies have been able to tap the credit markets at relatively low cost, despite jitters over their financial condition. On Wednesday, Fannie Mae issued $3 billion in two-year bonds that were priced to yield 3.272%. That was 0.74 percentage point more than yields on comparable Treasury bonds, more than double the gap between those two yields a year ago.

    In case they are unable to attract sufficient private money, though, the government needs a contingency plan to shore them up, Mr. Rosner said.

    "All the [regulatory] agencies are looking at what kind of actions may need to be taken," said William Seidman, a former bank regulator who served as chairman of Resolution Trust Corp., an agency created by Congress to sell the assets of failed savings and loans in the aftermath of that late-1980s financial crisis.

    Unprecedented Thinking

    The current credit crisis has prompted some unprecedented thinking from national policy makers about how to maintain the integrity of the financial system. Since the near-collapse of investment bank Bear Stearns Cos. earlier this year, both the Treasury and the Fed have been pondering how to unwind a failed institution in an orderly way.

    The most recent conversations have not only focused on Fannie Mae and Freddie Mac. Treasury officials have run through multiple different scenarios, including what would happen in the event of the failure of a big hedge fund or large commercial bank.

    In addition, since the crisis struck last August, officials at Treasury, the Fed and other agencies have been discussing contingency plans known as "break-the-glass" ideas, referring to what takes place right before someone pulls a fire alarm. The plans were meant to prepare policy makers for the unlikely event of a broad financial crisis.

    Any move to prop up the mortgage giants would likely set off a political firestorm. The two companies have long been a target for some Republicans who contend that Fannie and Freddie have profited from an implicit backing they receive from the government.

    Congress created Fannie and Freddie to provide a steady flow of funds for home mortgages. Though the Treasury regularly states that the U.S. government doesn't guarantee their debts, most investors believe the government would have to bail the companies out in a crisis. This "implicit guarantee" allows them to borrow money at lower interest rates, only modestly higher than those paid by the Treasury.

    The Bush administration has long worried about the risk posed by the companies, saying they have the potential to destabilize the entire financial market. The administration has been pushing for regulatory reforms to help mitigate the risk, including a new, more powerful regulator to oversee them. Congress is in the final stages of considering legislation to create that new regulator, which the Senate could pass Thursday.

    On Tuesday, Treasury Secretary Henry Paulson said the best thing policy makers could do to restore confidence in the housing market would be to pass legislation overhauling supervision of the two companies. Mr. Paulson views the companies as crucial to housing and financial markets.

    "What's the No. 1 thing that could be done?" he said in a speech. "What's the thing that will make the most difference? By far, by far it is the confidence that will be injected in that marketplace and the secondary marketplace through those institutions when reform is done."

    Constant Access

    To continue bolstering the mortgage market, the companies need constant access to the debt markets. If investors suddenly decide they don't want to buy the companies' debt, the companies might have to unload some of their holdings, including mortgage-backed securities. Investors have already lost confidence in mortgage-backed securities other than those guaranteed by Fannie, Freddie and the Federal Housing Administration. A dumping of mortgage-backed securities would raise interest rates for people seeking home loans.

    The Treasury has been worrying about such a dire scenario for years. In a 2006 speech, Emil Henry, then a Treasury assistant secretary, likened a failure of one of the companies to a "single gunshot setting off an avalanche."

    Fannie and Freddie have suffered combined losses of more than $11 billion in the nine months ended March 31. Analysts expect the toll to worsen as more homeowners default.

    Defaults on loans owned or guaranteed by the two companies remain fairly modest but are rising quickly. Fannie has reported that 1.22% of the single-family loans it owns or guarantees were 90 days or more overdue in April, up from 0.62% a year ago. For Freddie, the delinquency rate is 0.81%, up from 0.49% a year earlier.

    There is at least one precedent for the government making concrete a financial obligation that was previously only assumed. During the crisis caused by the failure of savings-and-loan institutions in the 1980s, Congress passed the Competitive Equality Banking Act of 1987, making the government legally liable for obligations of the Federal Deposit Insurance Corp. Congress had previously adopted a joint resolution that the government would support the deposit insurance fund if necessary, but the pledge wasn't binding.
     

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