Fannie Mae CEO Defends Mortgage Giant’s Stability

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• JUDY WOODRUFF:

  Lawmakers on Capitol Hill have been closely inspecting a controversial new proposal to help stabilize the nation's largest mortgage finance companies, Fannie Mae and its brother, Freddie Mac.

  Treasury Secretary Henry Paulson laid out the emergency plan this weekend after the stock value of the companies took a plunge.

  Together they hold or guarantee more than $5 trillion in mortgage debt. They are unique in that they are owned by private shareholders, but were created by a government charter.

  The Bush administration plan would increase a credit line to Fannie and Freddie and allow the treasury to buy direct equity in the companies, if needed.

  Daniel Mudd is the president and CEO of Fannie Mae, and he joins me now.

  It's good to have you with us.

  DANIEL MUDD, Fannie Mae President and CEO: Good to be here, Judy.

• JUDY WOODRUFF:

  First of all, as we sit here this evening, how financially sound is Fannie Mae?

• DANIEL MUDD:

  Fannie Mae is very financially sound. We have the highest capital classification. Capital is the amount we have to buffer any potential losses. We have a very high classification from our regulator, more capital than we've had at any point in our history.

  That said, we're going through a very tough market. Everybody knows that the housing market has been down for a period of time. We expect it to bounce around the bottom for a while longer before it starts to recover, so we need to be ready for that.

• JUDY WOODRUFF:

  But if your capitalization and the rest of it is as strong and sound as you say, why is this Treasury plan and this Bush administration plan necessary to help you out?

• DANIEL MUDD:

  Well, there's a lot of uncertainty out there, because all the capital markets, the lending markets are really built on confidence, confidence that homeowners have that they can buy and sell a home, move to the next place, that banks can make the loan, that those loans can be sold to Fannie Mae or Freddie Mac and traded around the world.

  Confidence has gotten very jittery over the course of the past quarter or so. And, as we saw, a very tough week in the markets last week. I think everybody agreed, given the importance of these companies, that there be a strong backstop in case that kind of lack of confidence and that kind of jitteriness continued for too long. The past couple of days have been better, so we're hopeful.