by Calculated Risk on 7/13/2008 07:14:00 PM

Update2: NY Times report: Rescue Sought for Fannie and Freddie

WSJ report: U.S. Announces Rescue Plan For Fannie Mae, Freddie Mac

Update: From the Fed Board grants Federal Reserve Bank of New York the authority to lend to Fannie Mae and Freddie Mac should such lending prove necessary

From Bloomberg: Paulson Statement on Freddie Mac, Fannie Mae: Full Text

... I have consulted with the Federal Reserve, OFHEO, the SEC, Congressional leaders of both parties and with the two companies to develop a three-part plan for immediate action. The President has asked me to work with Congress to act on this plan immediately.

First, as a liquidity backstop, the plan includes a temporary increase in the line of credit the GSEs have with Treasury. Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn.

Second, to ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for Treasury to purchase equity in either of the two GSEs if needed.

Use of either the line of credit or the equity investment would carry terms and conditions necessary to protect the taxpayer. Third, to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation currently moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards. ...

The two keys points are: "temporary authority for Treasury to purchase equity", and an "increase in the line of credit". I think we need more specifics.