U.S. Mulls Future of Fannie, Freddie - WSJ.com

U.S. Mulls Future of Fannie, Freddie - WSJ.com: "U.S. Mulls Future of Fannie, Freddie
Administration Ramps Up Contingency
Planning as Mortgage Giants Struggle
By JAMES R. HAGERTY, DEBORAH SOLOMON and DAMIAN PALETTA
July 10, 2008

The Bush administration has held talks about what to do in the event mortgage giants Fannie Mae and Freddie Mac falter, according to three people familiar with the matter, as the stock prices of both companies continue to fall sharply.
[No Reprieve]

These discussions have been going on for months and are part of normal contingency planning that the Treasury Department and other financial regulators regularly undertake. The talks have become more serious recently given the financial woes of the shareholder-owned, government-chartered companies, whose stability is vital to the functioning of the nation's housing market, these people say.

The government doesn't expect the entities to fail and no rescue plan is imminent, these people said. Government officials and market analysts expect both companies will be able to raise large amounts of capital relatively easily. Treasury officials are nonetheless talking about what the government could -- or should -- do if Fannie and Freddie become so pressed that they are unable to borrow money and continue operating.

On Wednesday, Freddie shares fell 24% to close on the New York Stock Exchange at"