The U.S. Treasury Department has hired Morgan Stanley to provide market analysis and financial expertise in connection with a government rescue of mortgage giants Fannie Mae and Freddie Mac.

Morgan Stanley will receive $95,000 for expenses in exchange for providing its services through Jan. 17, 2009, three days before the country inaugurates its next president.

Morgan Stanley said Tuesday it would not collect any fees for its services.
Morgan Stanley will not get access to Fannie and Freddie's books under its contract with Treasury.

It will, however, be tapped to perform a sensitivity analysis on the financial profiles of Fannie and Freddie and to assess appropriate capital structures for the two. It also will analyze the relationship between Fannie, Freddie and broader capital markets.

"Morgan Stanley will support the Treasury's work to promote market stability and the availability of mortgage credit," the company said in a statement issued Tuesday.

Treasury Tuesday repeated that it does not intend to use broader authorities granted to it when U.S. President George W. Bush last week signed a broad housing bill into law.

"This action should be interpreted as a prudent preparedness measure and nothing more," Treasury said in a statement. "Treasury does not, in its normal work, undertake these kinds of transactions."

The housing bill gives Treasury the authority to boost a line of credit available to Fannie and Freddie for 18 months and to purchase equity in them if necessary.

The Congressional Budget Office has estimated acting on those authorities could cost taxpayers $25 billion in the next two years, however the office estimates the probability Treasury will use those authorities is low.

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