Barney Frank Calls Into Question the Safety of Investing in Fannie & Freddie

Well, whether this is another gaffe or not, we don’t know yet. But House Democrat Barney Frank, who is the chairman of the House Financial Services Committee, has unexpectedly sent shudders through the financial world by calling into question the safety of investing in mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE).

“People who own Fannie and Freddie debt are not in the same legal position as [those who own] Treasury bonds, and I don’t want them to be,” Frank said in an interview Thursday.

According to the Washington Post,  until now, federal officials — who took over GSEs two years ago to save them from collapse — have signaled to the market that Fannie and Freddie debt have the same legal standing as Treasury debt.

Bloomberg: “Please don’t think this is federally guaranteed, I don’t think it is, I don’t think it should be, I don’t feel any obligation to bail you out,” Frank said. Congress will “certainly not” extend any new protections to bond and mortgage-security investors beyond what exists,” Frank told reporters after speaking to a conference of black, Hispanic and Asian Realtors in Washington today.

Frank’s comments widened the spread on Fannie Mae’s two-year debt and prompted a reaction from the U.S. Treasury Department, which reiterated its financial support for the companies.

“There should be no uncertainty about Treasury’s commitment to support Fannie Mae and Freddie Mac as they continue to play a vital role in the housing market during this current crisis,” said a department spokesman.

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About Ron Haruni 1070 Articles
Ron Haruni is the Co-Founder & Editor in Chief of Wall Street Pit.

1 Comment on Barney Frank Calls Into Question the Safety of Investing in Fannie & Freddie

  1. Dear Sir,
    I’m bothered and feel I’m being discriminated against each time (that’s often) I make a small contribution to a candidaate.
    I’m required to affirm that I’m a U. S. citizen (isn’t a case headed to the Supreme Court to allow foreign corporations to contribute?)
    I may not contribute with mmoney from a general treasury (?) pr a CORPORATION or labor organization or NATIONAL BANK.
    I must affirm that the $5 or $10 or max (these days) of $25 is not provided to me by another PERSON OR ENTITY for this contribution.

    Why do I have these restriction when CORPORATE PERSONS may be unidentified?

    Do I take this to the Supreme court? Is it worthy of a class action — PERSON VS. CORPORATE PERSON?

    I would appreciate a reply.
    Hopefully we’ll meet at Princeton at the Peace and Justice event.

    Thank you very much for your work for the common good.

    Peace – Mary Reader
    Middletown NY

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