Fannie Mae and Freddie Mac will reportedly get an injection of taxpayer capital and be subjected to a shakeout in senior management under a plan being finalized by the Treasury Department today, the Wall Street Journal reported, citing unnamed sources.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson were meeting today with top executives of Fannie Mae and Freddie Mac and the companies’ new regulator, the Federal Housing Finance Agency, the Journal said.

Editor’s note: This article was published on Friday, Sept. 5. Watch Inman News today for updates to this article.

Fannie Mae and Freddie Mac will reportedly get an injection of taxpayer capital and see a shakeout of senior management under a plan being finalized by the Treasury Department, the Wall Street Journal reported, citing unnamed sources.

Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson were meeting today with top executives of Fannie Mae and Freddie Mac and the companies’ new regulator, the Federal Housing Finance Agency, the Journal said.

An official announcement on the plan, which the Journal said is expected to involve a "creative use" of the Treasury Department’s newly expanded authority to take a stake in the companies, could come over the weekend. A Treasury spokeswoman said officials were "making progress" but would not comment further.

Shares of the companies plummeted in after-hours trading over fears that if the Treasury Department exercises its authority to lend the companies money or buy their stock, shares owned by current investors would become diluted or worthless.

Paulson has said the government does not want to nationalize Fannie and Freddie and is looking for a way to prop the companies up without wiping out investors.

But pressure to finalize a plan is said to be building as the companies must refinance $225 billion of mostly short-term debt in coming weeks. Although Fannie and Freddie would have to agree to any bailout plan, they may have little choice if they can’t raise money from the private sector.

Analysts at several investment banks have said the companies have enough cash to continue operating in the near term, but overseas central banks have been paring their holdings of federal agency debt in recent weeks, Reuters reported.

Armando Falcon Jr., who oversaw the government’s oversight of Fannie and Freddie from 1999 to 2005, told the Washington Post’s Washbiz Blog that the government should put the companies in receivership now to prevent a costlier bailout down the line.

In an interview conducted before the Wall Street Journal story broke after the close of trading today, Falcon said that while all of Fannie and Freddie’s shareholders would be wiped out, the companies could reopen Monday under government ownership, borrow money at lower interest rates, and pass savings to consumers.

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