Backing up for Nevada deposits

CARSON CITY -- Collateral, including Fannie Mae and Freddie Mac holdings, that backs pooled Nevada bank deposits is up in value following the Bush administration's seizure of the troubled mortgage giants, state Treasurer Kate Marshall says.

In a response to Gov. Jim Gibbons, who asked whether the Nevada deposits were threatened, Marshall said that as of Thursday the market value of the state's Freddie Mac and Fannie Mae collateral had increased nearly 4 percent since the takeover on Sunday.

"These increases in value are due mainly to the change in the guarantor of these assets from Freddie Mac and Fannie Mae to the United States government," Marshall said.

The Nevada Collateral Pool overseen by Marshall's office is used by many state and local government entities. Hundreds of millions of dollars can be in the pool at any given time, for deposit in banks that must provide collateral worth more than the actual deposits.

Marshall said that prior to Sunday's takeover by the Treasury Department, the Nevada Collateral Pool held collateral of $829 million, more than two-thirds of that issued by Freddie Mac and Fannie Mae -- and the day after the announcement the market value of that collateral began moving upward.

The treasurer also said Bank of America, which typically has a large share of the deposited pool funds, advised her that the value of its collateral is far above the state's requirements.

Also, some financial institutions are holding preferred Fannie Mae or Freddie Mac stock that has dropped sharply in value, but Marshall was told that Bank of America has minimal exposure to those stocks and doesn't use them as collateral for the pooled Nevada deposits.

The Treasury Department has sought to reassure investors that the government will meet its commitments in its unprecedented takeover of the mortgage companies, which own or guarantee about $5 trillion in home loans -- about half the country's total.

The Treasury released a statement Thursday aimed at answering what it describes as "frequently asked questions" about the takeovers including how solid it considered the pledge to provide up to $200 billion in capital if needed to Fannie Mae and Freddie Mac.

The Treasury statement says that while some may speculate that a future Congress might enact a law overturning that commitment, such a law would be inconsistent with the U.S. government's long-standing history of honoring its obligations.