Treasury to Double Purchase of Fannie and Freddie Stock

The U.S. Treasury announced Wednesday it will boost its funding commitments to government sponsored enterprises Fannie Mae and Freddie Mac.

The Treasury said it will increase its stock purchases of Fannie and Freddie by up to $400 billion, or $200 billion each - double the original level. The increase is "to ensure that each company maintains a positive net worth," Treasury Secretary Timothy Geithner said in a statement.

The Treasury will also boost its purchase of Fannie and Freddie's mortgage portfolios by $50 million each to $900 billion.

"Fannie Mae and Freddie Mac are critical to the functioning of the housing finance system in this country and play a key role in making mortgage rates affordable and maintaining the stability and liquidity of our mortgage market," Geithner said.

Last July, the U.S. Treasury was granted authority to provide financial support to the two entities, which in 2008 purchased or guaranteed almost three-quarters of all mortgages being originated in the United States.

By Stephen Huebl and edited by Sarah Sussman
©CEP News Ltd. 2009