US Treasury unveils support for Fannie Mae, Freddie Mac

WASHINGTON, July 14, 2008 (AFP) – Treasury Secretary Henry Paulson unveiled measures Sunday to bolster key US housing finance giants Fannie Mae and Freddie Mac, which were given Federal Reserve oversight and bigger credit lines.

Paulson said the “central role” the two play in real estate financing meant they should continue to respond to shareholders, and not be taken over by the federal government.

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To protect them from liquidity problems Paulson said the two organizations would get a bigger credit line “temporarily.” He did not give details on the amount of the credit line or terms.

Meanwhile, the Board of Governors of the Federal Reserve System announced that it granted the Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary.

Any lending would be at the primary credit rate and collateralized by US government and federal agency securities. The authorization was meant to supplement the Treasury’s lending authority, officials said.

And to ensure Fannie and Freddie can do their jobs, the Treasury Department will get temporary authority to buy their shares should that be necessary, Paulson said.

It was not immediately clear from his statem