(AFP) – Jul 22, 2008

WASHINGTON (AFP) — A rescue plan for mortgage finance firms Fannie Mae and Freddie Mac would cost an estimated 25 billion dollars over the 2009-2010 fiscal period, the Congressional Budget Office said Tuesday.

The cost estimate of 25 billion dollars takes into account both the possibility that the rescue may not be used and that the government may need to assist the two ailing government-sponsored, shareholder-owned firms, which underpin some five trillion dollars in mortgages.

"There is a significant chance -- probably better than 50 percent -- that the proposed new Treasury authority would not be used before it expired at the end of December 2009," Peter Orszag, the director of the CBO, said in a letter to the US House of Representatives budget committee.

With shares of Fannie and Freddie pummeled in recent weeks by solvency worries, the Federal Reserve opened up its lending facility and the US Treasury proposed a plan to allow more credit and government equity, subject to congressional approval.

US Treasury Secretary Henry Paulson has urged lawmakers to give speedy approval to a plan to allow the US Treasury to buy equity in the two firms to boost their capital along with other measures to raise confidence.

The Treasury chief offered no specific dollar amount for a proposal to boost the credit line for Fannie and Freddie.

In a speech in New York on Tuesday, Paulson called on Congress to swiftly approve the rescue plan for Fannie and Freddie and create a new "world-class" regulator for the government-sponsored enterprises.

"I am confident they recognize the demands of the current situation, and will act to complete work on this legislation this week," he said.

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