Fed to Strip GSEs of Fedwire Privileges

The Federal Reserve Board has decided to strip Fannie Mae, Freddie Mac, and other government-sponsored enterprises of their overdraft privileges on Fedwire, starting in 2006.Fedwire handles all the interest and redemption payments on GSE securities. By statute, the Federal Reserve Banks act as the fiscal agents for the GSEs. Currently Fannie, Freddie, and the Federal Home Loan Banks can rely on the Federal Reserve Banks to cover daily overdrafts on Fedwire. But starting July 20, 2006, the GSEs will be "required to fund interest and redemption payments by 4 p.m. Eastern Time in order for the payments to be processed that day," the Fed said.