Freddie And Fannie May Have The Discount Window Option

The Fannie Mae (FNM) and Freddie Mac (FRE) saga continues. After this morning’s news that senior Bush administration officials were considering a plan to have the government place them in a conservatorship, essentially making companies’ shares, worthless — Reuters is reporting that Fed Chair Bernanke told GSE’s Chief “Fannie, Freddie would be eligible for discount window”.

Federal Reserve Chairman Ben Bernanke told Freddie Mac chief Richard Syron that his company and Fannie Mae could take advantage of the emergency discount window, said a source familiar with a conversation between Bernanke and Freddie Mac chief Richard Syron.
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Bernanke and Syron spoke by telephone Thursday afternoon and in that call the central bank chief said he intended the discount window to be open to the two companies, said a source familiar with the phone conversation.

“The Fed declined comment on whether its discount window might be opened to GSEs. Freddie Mac spokesman Douglas Duvall declined to comment when asked about the phone call”. [Via Reuters]

If this latest development materializes and GSE’s gain access to tap the discount window, this will certainly be viewed positively by the markets, since it practically backstops the GSE’s in the event of a liquidity crisis.

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