(This guest post previously appeared at the author’s site)
I have been asked some questions by members of the media and others about my noting the distinction between the legal status of Fannie Mae and Freddie Mac debt and the debt of the U.S. Treasury.
Throughout the debate over Fannie and Freddie in past years, I have noted that Fannie and Freddie debt did not have the same legal standing as Treasury debt. This does not prevent the Treasury from treating the debt of Fannie and Freddie in the manner that it believes best supports the important goal of stabilizing the financial system. Specifically, I support the intention of the Treasury to stand fully behind the terms of its December 24 statement with regard to Fannie and Freddie debt. It is also the case in going forward, as we restructure housing finance, we will make sure that there are no implicit guarantees, hints, suggestions, or winks and nods. We will be explicit about what is and is not an obligation of the federal government.
To reiterate, I continue to think that it would be a mistake for Congress to take action that formally conferred on Fannie and Freddie debt the legal status of debt issued by the Treasury. But nothing in that position prevents Treasury from acting as it thinks best with regard to its obligation to provide stability to the housing market and the financial system.