Saturday, July 12, 2008

Freddie and the Fed Rumors

by Tanta on 7/12/2008 08:48:00 AM

Which is not the name of a band but probably should be.

Via Big Picture, we find this at Bloomberg:

July 11 (Bloomberg) -- The Federal Reserve has not had any discussions with Fannie Mae and Freddie Mac about access to direct loans from the central bank, Fed spokeswoman Michelle Smith said.

``Federal Reserve officials are following the situation closely,'' Smith said in a telephone interview today. ``However, there have been no discussions'' with the companies ``about access to the discount window,'' she said.
This is what Reuters reported yesterday afternoon:
WASHINGTON (Reuters) - Federal Reserve Chairman Ben Bernanke told Freddie Mac chief Richard Syron that his company and Fannie Mae could take advantage of the emergency discount window, according to a source familiar with the conversation.

The source said that Bernanke and Syron spoke by phone Thursday afternoon and the central bank chief said in that call he intended the discount window to be opened if necessary to the two largest U.S. mortgage finance companies.
I got my first email on the subject Friday morning at 10:20 a.m., the burden of which was that opening the discount window was one of a number of proposals the Fed was "considering." I gather it took only a few hours for an anonymous source to have recollected overhearing a phone conversation between Bernanke and Syron on Thursday for Reuters that made it a done deal.

This morning, the Washington Post has managed to construct a narrative that makes it all true, you see:
Senior government officials prepared emergency steps yesterday to rescue troubled mortgage giants Fannie Mae and Freddie Mac but stopped short after a campaign of public statements eased immediate concerns about the stability of the institutions.
In this version, apparently, the Fed was ready to open the discount window but Hank Paulson's masterful calming of the waters yesterday made it unnecessary. I think. The Post story stops attributing its knowledge of Fed thinking and planning to any source rather early in the story, and having read it twice now I'm still not sure I exactly follow the bouncing ball. But it sure sounds better than saying the press credulously printed an unfounded rumor, doesn't it?