Paulson: Yes, Bail Out Fannie (FNM), Freddie (FRE), But Keep In "Current Form"

Treasury Secretary Hank Paulson refused to endorse a nationalization plan for Fannie Mae (FNM) and Freddie Mac (FRE), saying he supported the mortgage lenders in their “current form“:

Today our primary focus is supporting Fannie Mae and Freddie Mac in their current form as they carry out their important mission, we are maintaining a dialogue with regulators and with the companies.

Paulson also said the government should do something to save the companies, however–which suggests that he’s on board with a bailout:

“We appreciate Congress’ important efforts to complete legislation that will help promote confidence in these companies. We are maintaining a dialogue with regulators and with the companies. OFHEO will continue to work with the companies as they take the steps necessary to allow them to continue to perform their important public mission.”

Paulson and Fed chief Ben Bernanke have insisted throughout the crisis that both lenders remain “adequately capitalised.” The market disagrees, and FNM and FRE have plunged again today, with both stocks down more than 30%.

As described here, if the government intervenes, FNM and FRE shareholders are likely to lose almost everything (as the deal would likely be contingent on this).

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