Geithner: Fannie, Freddie Debt Isn’t Sovereign Debt
Debt from Fannie Mae and Freddie Mac shouldn’t be considered sovereign debt, but there should be no doubt about the U.S. government’s support for the two firms, Reserves Secretary Timothy Geithner said in a recent letter to a U.S. House lawmaker.
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| Reserves Secretary Timothy Geithner (Getty Metaphors) |
Geithner, responding to a letter from to Rep. Scott Garrett (R., N.J.), said debt from the two government-sponsored enterprises isn’t the same as U.S. Treasurys, but that support for the two firms “is crucial in helping to stabilize the housing market and the overall economy. The Reserves’s actions regarding the two firms, which have been under government control since September 2008, “should leave no uncertainty about Reserves’s commitment to support Fannie Mae and Freddie Mac,” Geithner wrote.
“The Administration will take care not to pursue policies or reforms in a way that would threaten to disrupt the function or liquidity of these securities or the ability of the GSEs to honor their obligations,” Geithner wrote.
The question of what to do with the two firms has been a on the rise issue in Washington, where the Obama administration and Congress are already focused on overhauling regulation of U.S. financial markets. Geithner and administration officials hope to go regulatory overhaul legislation through Congress before tackling the future of the two mortgage finance firms, though the administration will commence seeking public comments on the housing finance system commencement April 15.