INSTANT VIEW: Fed's Bernanke: Must keep backing of GSE debt
NEW YORK (Reuters) - U.S. backing for debt issued by government-sponsored mortgage finance enterprises Fannie Mae and Freddie Mac must stay firm, even as the future of the firms is debated, Federal Reserve Chairman Ben Bernanke said on Friday.
KEY POINTS: * "Even if alternative organizational structures are considered for the future, the U.S. government's strong and effective guarantee of the obligations issued under the current GSE (government-sponsored enterprise) structure must be maintained," he said in remarks prepared for delivery to a public policy symposium in Berkeley, California.
COMMENTS:
JIM PAULSEN, CHIEF INVESTMENT OFFICER, WELLS CAPITAL MANAGEMENT, MINNEAPOLIS:
"I don't know if it'll have lot of impact -- it's another encouraging comment that they're going to continue to backstop and not back away from it right now but in reality who would have thought they would?
"I don't think anybody thought that it was a serious risk that they would suddenly make a decision to pull out of the GSE's.
"I think it's great for a trader and they can trade off for the next 15 minutes but I don't think it's going to have a lot of lasting impact."
WILLIAM LARKIN, FIXED INCOME PORTFOLIO MANAGER, CABOT MONEY MANAGEMENT, SALEM, MASSACHUSETTS:
"I think it's a big positive for anyone who is involved in the agency market. It's also a positive toward more emphasis on trying to make mortgages affordable. This whole speech is basically focused at the next step in their attack, which is going to be on making mortgages more affordable. They've been rising."
MATT MCCORMICK, PORTFOLIO MANAGER, BAHL & GAYNOR, CINCINNATI:
"He says GSEs should reduce their mortgage portfolios. Meanwhile politicians want to force banks to lend. You have politicians, the Fed, and the Treasury fighting over what will be the central message of the government. They want liquidity, but to the right people who won't default. They want to have their cake and eat it too."
MARKET REACTION: STOCKS: U.S. equity indexes hold gains. BONDS: Treasury debt prices stay little changed DOLLAR: U.S. dollar holds gains versus euro
