Federal Reserve Backs Freddie, Fannie

Washington, DC, July 14, 2008--The Federal Reserve and the Treasury Department announced steps Sunday to back  mortgage giants Fannie Mae and Freddie Mac.

The plan is intended to signal the government is prepared to take all necessary steps to prevent the credit market troubles that erupted last year with losses from subprime mortgages from engulfing financial markets.

The Fed said it gave the Federal Reserve Bank of New York authority to lend to the two companies, if necessary. They would pay 2.25 percent for any borrowed funds -- the same rate given to commercial banks and big Wall Street firms.

The Fed said this should help the companies' ability to "promote the availability of home mortgage credit during a period of stress in financial markets."

Secretary Henry Paulson said the Treasury is seeking expedited authority from Congress to expand its current line of credit to the two companies and make an equity investment in the companies -- if needed.

"Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies," Paulson said Sunday. "Their support for the housing market is particularly important as we work through the current housing correction."