LONDON (Reuters) - Treasury Secretary Henry Paulson said in an interview with U.S. radio broadast on Monday that a plan to take control of Freddie Mac and Fannie Mae had been structured in a way to protect U.S. taxpayers.
He also said the move had been taken after the Treasury had found “major structural flaws” in the two agencies.
“We structured this very carefully to protect the taxpayers,” he told WAMU radio, monitored via internet in London. “And to the extent that taxpayers are going to put preferred stock into this entity it will be structured so that the first losses will be borne by the existing shareholders.”
He stressed that existing shareholders were not being bailed out because government support was coming in above them.
Paulson also placed the blame for the current U.S. downturn squarely on the housing market.
“At the heart of the current economic challenge we have in the United States is a housing correction,” he said.