At press time, congressional leaders and the Bush Administration were still laboring over a multi-billion dollar market stabilization package that continues to suffer from uncertain political support and public skepticism. Talks will continue through the weekend and resume next week in the hope that a final resolution is reached. While the outcome is uncertain, immediate and near-term government intervention is still expected to address mortgage-related assets that have impaired liquidity and destabilized the financial services sector in recent months. Baker, Donelson, Bearman, Caldwell and Berkowitz, PC is actively monitoring the legal, regulatory and policy implications of these fast-breaking developments on the nation's financial and housing markets, assessing the ramifications for its large and diverse client base, and preparing for the coming debate in the 111th Congress on what will likely be the most far reaching regulatory reform initiatives since the Glass-Steagall Act of 1933 and the Securities Exchange Act of 1934.
The federal government will continue to take action to address the lack of liquidity in the financial markets caused by distressed mortgage-related assets held by financial institutions, such as mortgage-backed securities and subordinated mortgage securities, including collateralized debt obligations (CDOs) and collateralized mortgage obligations (CMOs). Three weeks ago, the Treasury Department and the Federal Housing Finance Agency (FHFA) took action to prevent the collapse of Fannie Mae and Freddie Mac, which collectively hold $5.3 trillion in MBS and other forms of debt. The sale of Bear Stearns, the takeover of A.I.G. and Secretary Paulson's $700 billion market stabilization proposal sent to Congress this week demonstrate the increased role the government will play in the market place in the purchase, management and sale of distressed assets.