Powerful Lawmaker Barney Frank shocked the investors yesterday by saying that the US Treasury will not be liable to pull shareholders out of their $5 trillion mortgage-linked securities issued by Fannie Mae and Freddie Mac.

He said, "Please don't think this debt is federally guaranteed, I don't think it is, I don't think it should be, I don't feel any obligation to bail you out. In a restructuring of the firms, investors could expect a whole range of options... from being paid nothing to a haircut to whatever".

However, Frank's statement was snubbed by the Treasury saying that it will back its Christmas Eve promise to sponsor the securities with unlimited funds.

After this reproach, Frank, Chairman of the Powerful House Financial Services Committee, retreated from his statement to cool down any probable instability in trading next week.

But even then, Frank was insolent. He said, "I have noted that Fannie and Freddie debt did not have the same legal standing as Treasury debt. This does not prevent the Treasury from treating the debt of Fannie and Freddie in the manner that it believes best supports the important goal of stabilizing the financial system".