Sunday, July 13, 2008

The Times: Treasury rescue for Fannie and Freddie

by Bill McBride on 7/13/2008 01:18:00 AM

From The Times: US Treasury rescue for Fannie Mae and Freddie Mac

US TREASURY secretary Hank Paulson is working on plans to inject up to $15 billion of capital into Fannie Mae and Freddie Mac to stem the crisis at America’s biggest mortgage firms.
Under the terms of the proposed move, the US government would receive a new class of shares in exchange for the capital, which would be hugely dilutive to shareholders.
The capital injection would also see both lenders granted permission to use the Federal Reserve’s discount window - a short-term emergency funding source.
Some in Wall Street believe a rescue plan may be announced ahead of tomorrow’s US market opening to calm nerves and support the debt auction.
Note: I just got back from a great hike in the Sierras and I'm definitely a little tired. Wow, I knew the news would be exciting while I was gone (with breaking news on IndyMac, Fannie and Freddie). Thanks to Tanta and everyone who sent me emails.

If this story is accurate, this bailout will be announced Sunday evening or Monday morning. The Bear Stearns announcement was on a Sunday around 7PM ET, so I would expect a Sunday announcement this time too (if this is going to happen).