Price tag put on Fannie and Freddie's rescue

23 July 2008

A bill has been placed on the rescue passage for beleaguered government-chartered mortgage giants Fannie Mae and Freddie Mac: $25 billion.

The potential cost would cover the capital line which might be needed to prop up the lenders, who have faced negative market sentiment due to rumors about their liquidity.

According to the Congressional Budget Office (CBO), which formulated the price tag in the run-up to the package's going before Congress for approval, there is a more than 50 per cent chance that it will be used.

The CBO also put the chances of the rescue costing more than $100 billion at five per cent.

Treasury secretary Henry Paulson originally announced the plan earlier this month, which he suggested was necessary to save Fannie and Freddie from collapsing.

The capital line seems likely to pass through Congress today.

"We remain optimistic about the prospects for this legislation," the Senate Banking Committee's leaders said in a statement.

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