FRBank Prez: Repeal GSEs' Treasury Credit Line

Congress should repeal a $2.25 billion line of credit that Fannie Mae and Freddie Mac maintain with the U.S. Treasury, according to St. Louis Federal Reserve Bank President William Poole.This line of credit "is too small to have any practical value in handling a crisis and is of symbolic value only," Mr. Poole told a Chicago FRBank conference. He also declared it a "welcome development" that the Office of Federal Housing Enterprise Oversight is establishing conservatorship procedures for Fannie and Freddie. "Should either Fannie Mae or Freddie Mac become financially stressed, the only way to avoid market chaos will be to have clear procedures in place, in advance, to handle the problem," Mr. Poole said. He also noted that repealing the line of credit and developing conservatorship procedures would reinforce the fact that the U.S. government does not guarantee the debt issued by the two mortgage giants.

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