Tuesday January 27, 12:19 AM
Fannie Mae to seek 11-16 bln dlrs from US Treasury
WASHINGTON, Jan 26, 2009 (AFP) - US government-controlled mortgage finance giant Fannie Mae (NYSE: FNM - news) said late Monday it would ask the US Treasury for 11 to 16 billion dollars to prevent its collapse.
Fannie Mae said in a filing with the US Securities and Exchange Commission (SEC) that it had determined the estimated size of the shortfall while preparing fourth-quarter and full-year 2008 results.
The filing was similarly worded to one issued late Friday by Fannie's sister institution, Freddie Mac (NYSE: FRE - news) , which said it was seeking 30 to 35 billion dollars from the Treasury.
"Although management currently estimates that the amount of this initial draw will be approximately 11 billion dollars to 16 billion dollars, the actual amount of the draw may differ materially from this estimate," said Fannie Mae, formally known as the Federal National Mortgage Association.
"Fannie Mae is still working through the process of preparing and finalizing its financial statements for the fourth quarter of 2008 and the year ended December 31, 2008," it said.
The funds would come from a 100-billion-dollar line of credit with the Treasury that was set up for each company to keep them with at least positive net worth.
Freddie and Fannie, both government-chartered but shareholder-owned companies designed to provide liquidity to the housing market, were placed under government control in early September in an effort to avert a meltdown in the financial system and offer a backstop for trillions of dollars in outstanding mortgage debt.
Under the plan, the two firms received government-appointed chief executives and shed their shareholder profit mission. The Treasury agreed to inject 100 billion dollars in each company if needed.
It was the first time that Fannie Mae announced its plan to draw from the credit line.
In November, Fannie Mae reported a third-quarter loss of 28.99 billion dollars and warned that it may need to tap the credit line if it had a "significant net loss" in the fourth quarter.
Freddie Mac, whose finances are significantly more fragile, drew 13.8 billion dollars from the Treasury after it published a third-quarter loss of 25.3 billion dollars. It had lost 28.9 billion dollars in the second quarter.
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