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Senators React to Freddie Mac, Fannie Mae Rescue Plan

After the U.S. Treasury's decision to take over mortgage giants Fannie Mae and Freddie Mac, Senate Banking Committee members Chris Dodd, D-Conn., and Richard Shelby, R.-Ala., provide Congressional perspective on the rescue plan and assess the road ahead.

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  • MARGARET WARNER:

    In the wake of the government's decision to seize control of the mortgage giants, there are questions over the impact of the plan and what lies ahead for the two companies.

    The takeover plan engineered by Treasury Secretary Henry Paulson has several key elements. Among them, both companies were placed under conservatorship, and top executives were replaced. The government said it would inject money into Fannie Mae and Freddie Mac as needed, up to $100 billion per company.

    The government also guaranteed the investments of holders of Fannie and Freddie debt, but gave common shareholders no protection against stock price losses. The government also pledged to buy $5 billion worth of mortgage securities backed by Fannie and Freddie. And, after 2010, the companies would be forced to reduce their portfolios by 10 percent a year.

    For what all this may mean, I'm joined by two members of the Senate committee that oversees the mortgage and banking industries, Chris Dodd of Connecticut, chairman of the Senate Committee on Banking, Housing and Urban Affairs, and Richard Shelby of Alabama, the committee's ranking Republican.

    Welcome to you both, senators.