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By Zachary A. Goldfarb
An influential voice on Capitol Hill has unexpectedly called into question the safety of investing in Fannie Maeand Freddie Mac, raising the specter that investors who have lent money to the two firms or bought their mortgage-backed securities could one day suffer losses.
The comments by Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, forced the Treasury Department to issue a statement Friday reaffirming the government's commitment to the companies, their creditors and their investors.
If investors come to doubt that Fannie Mae and Freddie Mac debt and investments are risk-free, they would demand a higher return -- which could ripple across the U.S. housing market and cause mortgage interest rates to rise, depressing demand for homes. The federal government seized Fannie Mae and Freddie Mac a year and a half ago and, since then, has signaled that lending to the companies or buying their investments is just about as safe as putting money into U.S. government debt.
But in an interview Thursday, Frank said, "People who own Fannie and Freddie debt are not in the same legal position as [those who own] Treasury bonds, and I don't want them to be."
Rep. Barney Frank warns of Fannie, Freddie risks
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