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U.S. to back Fannie Mae, Freddie Mac

July 13, 2008 at 7:51 PM

WASHINGTON, July 13 (UPI) -- The U.S. Treasury and Federal Reserve have settled on a strategy for the U.S. government to bail out Fannie Mae and Freddie Mac, officials said Sunday.

Following a week in which the mortgage lenders' stock prices fell 45 percent, U.S. officials spent much of the weekend working on a plan to assure investors about the future of the National Mortgage Association, known as Fannie Mae, and the Federal Home Mortgage Corp., known as Freddie Mac, The Wall Street Journal reported Sunday.

The U.S. Treasury issued a statement Sunday saying it would seek congressional approval of a temporary increase in a Treasury line of credit for the two lenders. The statement was timed to precede the opening of markets Monday, as well as an auction of debt by Freddie, the Journal said.

The statement said Treasury would seek temporary authority to buy equity in Fannie Mae or Freddie Mac, if necessary, to ensure the lenders have "sufficient capital to continue to serve their mission."

Meeting Sunday, the Fed's Board of Governors voted to authorize the New York Fed to lend to Fannie Mae and Freddie Mac, if necessary -- a move that could provide the companies a source of money in case of a short-term funding crisis, the Journal said.

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