Fate of Fannie and Freddie Hinges on $225 Billion

Wall Street Journal (08/21/08) P. C1; Natarajan, Prabha; Shrivastava, Anusha; Solomon, Deborah
By the end of next month, Barclays Capital reports that Fannie Mae and Freddie Mac must refinance more than $225 billion in debt, with short-term discount notes accounting for almost 87 percent of the total. While the government-sponsored enterprises have yet to encounter difficulty in persuading investors to purchase debt with maturation dates of no more than one year, investors are concerned about the lack of detail regarding the Treasury's plan to bail out Fannie Mae and Freddie Mac in the event of a financial crisis. Some have responded by steering clear of GSE debt. Nothing has been set in stone, but the Treasury is considering several options--such as a government takeover involving a substantial capital infusion or a management ouster--and officials are debating whether it makes sense to implement a rescue plan for one GSE or take action to save both simultaneously.