Monday, September 8, 2008
· The Federal Housing Finance Agency, the firms' direct regulator, appoints senior managers and oversees all operations. Chief executives have been dismissed (but have agreed to help during the transition) and replaced with outsiders, who are to be paid significantly less.
· The federal government stands ready to inject money if either company is found to have liabilities that exceed its assets, an assessment to be made quarterly.
· Holders of debt in the companies, and of mortgages that they guarantee, are protected against losses.
· The companies will pay no dividends to owners of their stock, and the current shareholders -- who now own 100 percent of each company -- will have their stakes reduced to 20 percent, subject to further dilution if the government injects money.
· The government receives $1 billion worth of a special class of stock in each company that puts taxpayers' interests ahead of those of any other shareholders.
· The companies will be prohibited from lobbying and other political involvement. Their charitable giving is being reviewed.
· Fannie Mae and Freddie Mac will increase mortgage funding between now and the end of 2009 to help stabilize the troubled housing and mortgage markets.
· Starting in 2010, they will be forced to reduce the volume of mortgages they fund by 10 percent per year for about 10 years, to reduce the risk the companies pose to the financial system as a whole.
· Officials expect Congress to restructure the firms before 2010.
· The government will also start a program to buy pools of mortgage-backed securities guaranteed by Fannie Mae and Freddie Mac. The program is to be operated at the Treasury secretary's discretion and an initial $5 billion worth of such purchases will be made in the coming days. That is likely to reduce the interest rates Americans pay on a new home loan.