Early Briefing: The Fannie-Freddie Rescue

*The government seized control of Fannie Mae and Freddie Mac in a dramatic bid to restore faith in the embattled mortgage giants and arrest a vicious cycle that has driven the nation's economy into a steep downturn. The companies, with a combined 11,000 employees, have funded more than two-thirds of U.S. home loans in recent months, and doubts over their ability to continue doing so had threatened to immerse the economy into even more turmoil.

The government has pledged to inject money in the companies in any quarter in which they would otherwise be insolvent -- up to $100 billion in total for each company.

Paulson (Susan Walsh - AP)

*THE FUTURE: Treasury Secretary Henry M. Paulson Jr.'s rescue plan for Fannie Mae and Freddie Mac almost certainly means the two mortgage financiers will cease to exist in their current form, igniting the battle over the future of these giant institutions. Among top Treasury officials, there is increasing interest in structuring Fannie and Freddie like public utilities, according to sources familiar with Treasury's thinking. Under this model, the companies would be able to raise private money by issuing stock, but shareholder returns would be capped by regulators. Any plan requires congressional approval.

GOP presidential candidate John McCain wants the firms downsized or simply closed, an economic adviser said. Campaign officials for Barack Obama said he thinks the status quo is "untenable" but hasn't taken a position on the ultimate form of the companies.

*ANALYSIS: Hurricane Hank swept through nation's capital yesterday with gale force regulatory winds and a tidal surge of federal cash, upending two of Washington's biggest enterprises and permanently changing the landscape of housing finance in America, writes Steven Pearlstein.


*THE LEADERS: Herbert M. Allison Jr., 65, who took over yesterday at Fannie Mae, worked for decades at Merrill Lynch and most recently served as chairman and chief executive of TIAA-CREF. David M. Moffett, 56, who now heads Freddie Mac, spent most of his life as a chief financial officer at a series of banks and since early 2007 has served as a senior adviser to the financial services team at Carlyle Group, the District-based private equity giant.

*QUESTIONS: What does it mean for mortgage rates?

*THE WORKERS: The government's takeover of District-based Fannie Mae and Freddie Mac of McLean was for some employees the painful conclusion of several difficult years that seemed to reduce the status of two firms that once dominated the local business and philanthropic scene.

Whew! Now onto other news:

*The Capital One bank branch in trendy Tribeca is in an old art gallery with exposed brick and wrought iron. The branch in Union Square features pictures from the nearby farmer's market. The one by Chinatown has floor-to-ceiling bamboo, and the one in Chelsea has zebra-patterned chairs.

Capital One's Chelsea branch. Photo by Helayne Seidman for The Washington Post

The design touches are one way McLean-based credit card giant Capital One has tried to nurture the local look and feel of the bank branches the company has bought as part of a strategy to transform itself into what longtime chief executive Richard Fairbank called "one of the nation's great banks." Capital One embarked on this journey a few years ago, and Fairbank and others say the strategy has helped buffer the company from some of the harshest effects of the meltdown in the credit markets.

But the journey has hardly been problem-free.

*Despite a dismal U.S. economy, employers in the region offered raises averaging 4.7 percent this year, according to a survey by the Human Resource Association of the National Capital Area. The association, which has issued the report for nearly three decades, sent its survey to 2,800 companies, organizations and agencies in the Washington-Baltimore region. It received responses from 339 companies that employ more than 370,000 full-time workers, including Freddie Mac, the National Association of Social Workers, American University, Carlyle Group, Raytheon and BearingPoint.

The survey found that in the year ended in March, salaries in this region continued to rise because of competition for highly skilled staffers by government contractors. Employers are offering raises that surpass the national average, as well as bonuses to woo workers or to keep their most valued employees from jumping ship.

Antonio Price, 23, started as a hotel security guard at the Hyatt Regency Washington in May. Photo by Tammy Hagin

*The Hyatt Regency Washington on Capitol Hill is known as a stopover for lobbyists looking to kill an annoying bill or save a favorite tax break. So it's no stretch that the hotel has its own lobbyist, of sorts. Antonio Price, 23, started as a chatty hotel security guard in May and was recently promoted to the newly created post of "lobbyist." His job: meet and greet hotel guests, offering a helping hand and a little direction on their way to and from their rooms.

*Sign of the times? Greg Marsh, a mechanic at the Vespa service center in Silver Spring, says that last year, most customers would have to wait a week or two at the most for service. But now the shop's wait list is so long that customers calling this week for appointments will have to wait until Oct. 22 to be serviced.

"I think $4 a gallon did the change," Marsh said. "The rising fuel prices just literally scared a lot of people into getting scooters."

By Terri Rupar  |  September 8, 2008; 5:00 AM ET  | Category:  Economy Watch , Morning Brief
Previous: Feds To Fannie: Your Jobs Are Secure | Next: Up and Down: Provident, Jos. A. Bank, Ciena, Chindex


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