This Washington Post article leaks some details.
The government has formulated a plan to put troubled mortgage giants Fannie Mae and Freddie Mac under federal control, dismiss their top executives and prop them up financially
No surprise there.
Instead of giving each company a big capital infusion upfront, the government could make quarterly injections as the companies’ losses warrant, the sources said. This would be an attempt to minimize the initial cost of the rescue.
That is, it’s cheaper up front.
Paulson, Federal Reserve Chairman Ben S. Bernanke and James Lockhart, the director of the housing finance regulator, told the executives of the plan, which would strip them of their jobs but not include any broader management shake-up.
That was an historic meeting!
If the government plan succeeds, uncertainty in the markets around Fannie Mae and Freddie Mac could subside, making it easier for the companies to get access to funding at cheaper rates. That, in turn, could have a spillover effect in the overall market for mortgages, lowering interest rates and helping the battered housing market recover.
I don’t know if this strengthens the market as much as it stops the bleeding.
Well, I guess that is the first step in the healing process.