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On Thursday, the Treasury Department issued a press release, called "Update on Status of Support for Housing Programs." Its fourth paragraph reads as follows:
At the time the Federal Housing Finance Agency (FHFA) placed Fannie Mae and Freddie Mac into conservatorship in September 2008, Treasury established Preferred Stock Purchase Agreements (PSPAs) to ensure that each firm maintained a positive net worth. Treasury is now amending the PSPAs to allow the cap on Treasury's funding commitment under these agreements to increase as necessary to accommodate any cumulative reduction in net worth over the next three years. At the conclusion of the three year period, the remaining commitment will then be fully available to be drawn per the terms of the agreements.
Translation: No matter how badly things further deteriorate at these former government sponsored enterprises, both of which since last year in essence become government-controlled enterprises, Uncle Sam (i.e., current and future generations of taxpayers) will cover their losses.
Here is how three different news outlets headlined this Treasury/Obama administration move:
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