Fannie & Freddie: The Legal Edition

[WSJ_law_blog]

Photo: Associated Press

By now you know. Yesterday, Treasury Secretary Hank Paulson announced a formal rescue plan to take control of troubled mortgage giants Fannie Mae and Freddie Mac and replace the companies’ chief executives.

Here’s the WSJ report, and here’s how the plan will go down: The Treasury will acquire $1 billion of preferred shares in each company without providing immediate cash, and has pledged to provide as much as $200 billion to the companies as they cope with heavy losses on mortgage defaults. The Treasury’s plan puts the two companies under a conservatorship, giving management control to their regulator, the Federal Housing Finance Agency, or FHFA. (The WSJ editorial board isn’t thrilled about it.)

As you might imagine, legions of lawyers helped cook up the deal. On Fannie’s side were Sullivan & Cromwell’s Rodgin Cohen and Mark Welshimer, who were assisted by lawyers from Latham & Watkins. Advising Fannie’s independent directors were Cravath’s Robert Joffe, Philip Gelston and Susan Webster.

Repping Freddie were Davis Polk’s New York-based partners Jeffrey Small, Randall Guynn, John Brandow, Phillip Mills, Nick Kronfeld and Luigi De Ghenghi, along with Covington & Burling’s D.C.-based Stuart Stock.

Wachtell’s Marty Lipton, Ed Herlihy, Harold Novikoff and Lawrence Makow repped the Treasury, while Cleary Gottlieb’s Ken Bachman, Alan Beller, Linda Soldo, Seth Grosshandler, Michael Mazzuchi and Derek Bush advised Morgan Stanley, which in turn provided financial advice to the Treasury.