Treasury hires Morgan Stanley as GSE adviser
The Treasury said on Tuesday it hired Morgan Stanley (MS.N: Quote, Profile, Research, Stock Buzz) to advise it on whether housing finance giants Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) are adequately capitalized as the government tries to determine how it would use its new powers to support the two companies.
The Treasury said it has no immediate plans to provide support to Fannie Mae and Freddie Mac, the two largest U.S. providers of housing finance that together guarantee more than $5 trillion of mortgage assets, but wants to understand how it would use its new powers if needed.
Sweeping housing rescue legislation enacted last week gave the Treasury temporary authority to make loans and provide equity to Fannie Mae and Freddie Mac to keep them viable providers of mortgage finance.
The move is aimed at shoring up investor confidence in the two government-sponsored enterprises at a time when their liquidity is needed to help end a crippling slide in the American housing market.
The Treasury said Morgan Stanley won a competitive bid process to conduct a “sensitivity analysis” of the companies’ financial profiles and provide an assessment of appropriate capital structures for the two firms.
The Treasury acknowledged that the move by Treasury Secretary Henry Paulson, a former chief of Goldman Sachs, to hire a Wall Street firm for advice on stabilizing markets is an unusual occurrence.
But it said it had a responsibility to taxpayers and the financial system to analyze and understand its new powers payday advance.
MORGAN TO BE PAID FOR EXPENSES ONLY
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