U.S. Government Considers GSE Takeover

Senior Bush administration officials are weighing a plan to take over troubled government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac and place them in a conservatorship, the New York Times reports.

Under a conservatorship, the GSEs' shares would be worthless or nearly worthless, while mortgage losses incurred would be paid by taxpayers. A 1992 law allows Fannie or Freddie to be put into conservatorship if a top regulator finds that either one is ‘critically undercapitalized.’ A conservator would be given powers to overhaul the agencies – but not close them.

Although concern has increased in recent weeks, the officials stressed that Fannie and Freddie are not yet considered to be in a crisis situation, and no government action is imminent.

Source: New York Times

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