Treasury Doubles Funding Commitment to Fannie/Freddie

The Treasury Department has doubled its funding commitment to keep Fannie Mae and Freddie Mac afloat in an effort to reassure market participants that the government will continue to "stand firmly behind" the two federally chartered mortgage giants. Treasury extended a $100 billion commitment to each GSE when it placed Fannie and Freddie into conservatorships in September. Now it has doubled that backup support to $200 billion to ensure the government-sponsored enterprises continue to operate with a positive net worth. Fannie and Freddie are expected to request a draw from Treasury to cover their fourth-quarter losses and maintain a positive net worth. Freddie received Treasury assistance to cover third quarter losses. Treasury secretary Timothy Geithner said the increase is designed to assure market participants that the GSEs will continue to support the housing finance system. "Given the difficulties in the housing market today, we stand firmly behind their ability to provide that support," Mr. Geithner said. Treasury also increased the GSEs' portfolio limits by $50 billion to $900 billion and renewed its pledge to continue to purchase Fannie and Freddie mortgage-backed securities. In January, Treasury purchased $22.6 billion in GSE MBS.