Officials Check on Freddie Mac Securities Sale

U.S. Treasury Department officials are trying to make sure that Freddie Mac, one of two troubled U.S. giant mortgage firms, will be able sell $3 billion in securities this week at a previously scheduled sale, the Washington Post reported on Sunday.


On Monday, Freddie Mac is due to sell the $3 billion of short-term debt in what will be a barometer of market appetite for the firm's securities.

The Post said Treasury Department officials on Saturday spoke by telephone with major banks that normally purchase such securities to ensure that these firms still plan to place bids, and they were optimistic the sale would be a success.

Shares of Freddie Mac and Fannie Mae, companies that play a central role in U.S. housing markets, fell sharply this past week as fears mounted the two would not have enough capital to make it through the worst U.S. housing crisis since the Great Depression.

The shares are trading at a fraction of their value of a year ago.

The newspaper said that anything less than a successful sale of the securities would pose new questions about how far the federal government is willing to go to prop up Freddie Mac, Fannie Mae and other faltering financial enterprises.

The companies on Friday said their finances were sound enough to withstand the housing crisis, and government officials scrambled to make public statements to restore confidence in them.

The Post said Treasury officials were considering several options if interest in the sale of Freddie Mac securities is lagging. In one possibility option, the Treasury Department or the Federal Reserve would purchase the securities directly.

The newspaper said other possibilities are allowing the Federal Reserve Bank in New York to buy the debt indirectly through private brokers or asking private firms to purchase the debt while extending to them a public or private assurance that the government would back the securities if Freddie were ultimately unable to cover its obligations.

The $5.2 trillion in mortgages owned or guaranteed by Fannie Mac and Freddie Mac dwarfs the size of the savings and loan institutions taken over by the federal government in the late 1980s or the big Japanese banks that required government assistance there in the 1990s.

Until now, these are two of the biggest post-Depression financial rescue efforts, the paper said.