Paulson: No Plans For Freddie, Fannie Bailout
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Treasury Secretary Paulson said there are no plans to use his new authority to inject capital into mortgage companies Fannie Mae and Freddie Mac, which both posted worse-than-expected earnings last week.
“We have no plans to insert money into either of those two institutions,” Mr. Paulson said in an interview with NBC’s “Meet the Press” broadcast today from Beijing. He added that their earnings results were “not a surprise.”
Mr. Paulson and Congress last month brokered a plan to bolster the two government-sponsored enterprises that includes giving Treasury the right to buy their shares. Fannie and Freddie, which account for almost half of the $12 trillion mortgage market, reported losses three times worse than estimated, prompting some analysts to predict that Mr. Paulson will have to act.
“Given that Fannie Mae and Freddie Mac are solely involved in housing, that’s their sole business, and given the magnitude of the housing correction we’ve had, it’s not a surprise to me to see those losses,” Mr. Paulson said.
Mr. Paulson, the former chairman of Goldman Sachs Group Inc., said he won’t remain as Treasury secretary after President Bush’s term ends in January, regardless of who is elected president in November.
“I’m going to run right up until the end,” said Paulson, 62, who joined the Bush administration in July 2006, succeeding John Snow. “I will do everything I can to make for a smooth transition, to work closely with my successor here in Treasury.”
Mr. Paulson said Freddie and Fannie’s financial problems underscored his view that the housing crisis remains the biggest threat to the American economy. The worst housing slump since the Depression won’t end quickly, he said.
“We have got some serious issues that we’re dealing with in our economy,” he said. “I believe it’s going to take us well beyond the end of the year to work through all the housing problems.”
Home prices in 20 American metropolitan areas fell in May by 15.8% from a year earlier, the most on record, the S&P/Case-Shiller home-price index showed on July 29. Foreclosure filings in the second quarter jumped 121% from a year earlier, RealtyTrac Inc., said last month.
