Washington - The US government was preparing to take over the twin mortgage finance giants known as Fannie Mae and Freddie Mac, dismiss their top executives and prop up the companies with government funds, media reports said late Friday. The Washington Post and New York Times quoted unnamed officials and company executives briefed on the plan as saying the move could come over the weekend, possibly by Sunday.
The move appeared to be based on a law passed by the US Congress in early August which also shored up other aspects of the faltering US mortgage market that has been undermined by record foreclosures.
Treasury Secretary Henry Paulson on Friday met with executives of the two companies and regulators along with Federal Reserve chairman Ben Bernanke and Federal Housing Finance Agency (FHFA) director James Lockhart in Washington, Bloomberg financial news agency reported.
The chief executives of the two companies were summoned and told that they and their boards would be replaced, the Times reported.
The two companies have suffered 14.9 billion dollars in losses from the widening mortgage foreclosure crisis in the US that has rippled outward to foreign investors. The central banks of many countries, including those in Asia, hold considerable stock in Fannie and Freddie, Bloomberg reported.
Bloomberg reported that catered food was scheduled for delivery through the weekend to the FHFA, indicating intense talks were scheduled. Congressional leaders were reported to be on standby for briefings over the weekend, with a possible plan to be released to the public by Saturday or Sunday.
The two companies would be placed in a conservatorship, the Times and Post reported. Such a move could either deal another blow to US finance markets as the country struggles with soaring mortgage foreclosures or restore confidence to investors.
Shareholders in Freddie Mac and Fannie Mae would lose most of their investment, with taxpayers carrying any remaining guaranteed worth, the newspapers said. But the Post reported that while common stock could be diluted in value, company debt and preferred shares could be protected by the government.
Fannie and Freddie common stock was valued at nearly 100 billion dollars at the end of 2007, but has dropped to about 10 billion dollars, the Times reported. The common stock is held by individuals, pension funds and mutual funds.
In August, Fannie Mae reported a second quarter loss of 2.3 billion dollars, marking the fourth straight quarter of losses for the US bank. The company recorded a 1.86-billion-dollar gain in the same period a year ago.
The number of new mortgage holders ente
