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STEVE INSKEEP, host:

It's MORNING EDITION from NPR News. Good morning. I'm Steve Inskeep.

DEBORAH AMOS, host:

And I'm Deborah Amos.

The troubles at mortgage giants Fannie Mae and Freddie Mac aren't over but investors in their stocks seem a bit happier. Fannie Mae's shares went up more than 18 percent yesterday; Freddie Mac's gained 22 percent. The rise in share prices after last week's freefall comes as the administration has been lobbying Congress to support its rescue plan for the financially troubled mortgage giants.

Some lawmakers are skeptical about the plan. One of them is the Republican senator from Alabama. Richard Shelby is the ranking Republican on the Senate Banking Committee. Welcome to the program.

Senator RICHARD SHELBY (Republican, Alabama): Thank you.

AMOS: Senator Shelby, you have been billed as one of the lawmakers who could derail the rescue plan. Why is that?

Sen. SHELBY: Well, that's just, I guess, press talk. I'm not interested in derailing anything that will bring some stability to our financial markets. But I have been in the past - for six, seven years - been trying to shore up the capital, get a strong regulator for the government-sponsored enterprises we know as Fannie Mae and Freddie Mac.

The problem is we were not able to pass that legislation. It was thwarted by some of my friends on the other side of the aisle, and we're where we are today. If it were an ordinary situation, I would say, gosh, let it go belly-up if it can't make it, and if it prospers, fine.

But we created these organizations a long time ago to have the implicit backing of the United States of America - in other words the taxpayer. This might be an approach that will work. It might not be, but it will probably bring some type of confidence back to the market that we're not going to let Fannie Mae and Freddie Mac go under.

AMOS: Senator, I know that the secretary of the Treasury came and spoke to you personally.

Sen. SHELBY: He did.

AMOS: And did you make your arguments to him and did he convince you that, as we often hear, too big to fail, and that this legislation is going to have to pass?

Sen. SHELBY: Well, I wouldn't say I'm totally convinced but I'm convinced of one thing. We have a financial powder keg and we do not want to light the fuse. I try to stay open-minded. By nature I'm very skeptical of government interventions. But you can see what's happened to our banking system, most of it, in the last year or so. And we got a problem on our hand.

AMOS: In the long run, once this crisis of confidence is over and the housing markets stabilize, do you think it's possible to either totally privatize Freddie and Fannie or better to totally nationalize Freddie and Fannie?

Sen. SHELBY: Well, let's don't nationalize anything. That would be the last, last straw. But I think if we can pass in this legislation a strong independent regulator, that's what we need.

AMOS: Senator, help me understand something. I know that people throw around this word nationalize - and it's become a dirty word in this country - but what is the difference in having an open check backed by the government for this semi-private, semi-government company and having Fannie Mae and Freddie Mac be a government institution? I don't understand what the difference would be.

Sen. SHELBY: There is a difference now. It might be one of degree. But what they're talking about is credit, standby credit for a limited period of time as opposed to taking over the companies totally and owning them.

AMOS: Senator, what is your bottom line? What do you have to see in this rescue package before you'll sign off?

Sen. SHELBY: Creating a strong regulator over Fannie Mae and Freddie Mac to shore up the capital, to make sure they're well managed. Might get into compensation; this might get into lobbying. Some assurance from the Treasury, the administration and the Federal Reserve that this is of the utmost importance and this is going to be temporary in nature.

AMOS: Thank you very much.

Sen. SHELBY: Thank you.

AMOS: Senator Richard Shelby is the ranking Republican member on the Senate Banking Committee.

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