The US government has analysed the capital requirements of mortgage GSEs (Government sponsored enterprises) Freddie Mac and Fannie Mae, which have lost billions in cash as a result of the US housing crash (referred to by the Treasure as "housing correction"). The GSEs have 5.3 trillion dollars of debt outstanding and MBS securities. They will now be administered by the FHFA (Federal Housing Finance Agency).
Fortune magazine covers the "Frankenstein business model" of the two institutions in the article "The $5 trillion mess". The two companies under the FHFA will not be able to make any payments to shareholders until the end of 2009.
The statement was made by Henry Paulson, Secretary of the US Treasury, prior to which he was CEO of Goldman Sachs.
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