Skip to main content

What Does It Mean When The Treasury Has "No Plans" To Do Something?

  • Author:
  • Updated:

So what's going on between the Treasury Department and the GSEs? This morning Barron's said that a government bailout of Fannie Mae and Freddie Mac was becoming more likely, in part because the mortgage giants were unlikely to be able to raise enough money in the open markets. The Treasury kinda-sorta put down the idea, saying it had "no plans" to use the authority lawmakers gave it to rescue Fannie and Freddie.
"As the secretary said many times before, we have no plans to use the authority that we've been given, so I'm not going to comment on any speculation," Treasury resident hottie spokeswoman Jennifer Zuccarelli told a news briefing on Monday.
Those with memories that stretch back beyond the current crisis will recall that five days before Paulson was named Treasury Secretary, President George Bush responded to questions about the rumor resignation of John Snow, Paulson's predecessor, by saying he knew of "no plans" for Snow to step down.
Of course, the Treasury's denials are almost entirely besides the point. No one is asserting that the Treasury has current plans--like a schedule--to inject new capital or loans into Fannie and Freddie. Rather, Barron's was analyzing the likelihood that the government will need to do so to keep them afloat. We suspect that the Fed was sending a subtle message that it didn't necessary disagree with Barron's by issuing this half denial.
Interestingly, speculation began to increase today that the Treasury may ultimately try to split apart Fannie. The idea would be to build a "Good Bank" of a securitizing Fannie that could continue as an independent entity borrowing at market costs without an implicit guarantee, and a "Bad Bank" loaded up with Fannie's awful portfolio and ill-advised loan guarantees.