Shares of mortgage issuers Fannie Mae (FNM) and Freddie Mac (FRE) are surging this morning on the U.S. Treasury Department’s announcement Thursday, after the close of the shortened session, that it will amend its agreements with both firms to allow for, in a sense, unlimited funding of both institutions. The Treasury said it will amend its preferred stock purchase agreement (PSPA) with both, which had been capped at $200 billion, to allow its funding commitment “to increase as necessary to accommodate any cumulative reduction in net wroth over the next three years.”
A Dow Jones Newswires article by James Hagerty and Jessica Holzer on Friday quote Spencer Bachus, representative from Alabama, as saying the amendment was a “blank check” for Fannie and Freddie.
The amendment follows the announcement on Thursday that Fannie’s and Freddie’s CEOs are eligible for as much as $6 million per year in compensation.
Fannie Mae shares are up 24 cents, or 23%, at $1.29, while Freddie Mac is up 31 censt, or 25%, at $1.57.
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