US Treasury Secretary Henry Paulson met regulators and executives of Fannie Mae and Freddie Mac on Friday amid speculation the Bush Administration is close to completing a plan for any injection of government funds in the companies.

Mr Paulson met Federal Reserve chairman Ben Bernanke, Fannie Mae CEO Daniel Mudd, Freddie Mac CEO Richard Syron and Federal Housing Finance Agency director James Lockhart in Washington.

Mr Mudd and his aides have also been meeting at the FHFA, which oversees the two companies, with catered food scheduled for delivery at the agency during the weekend.

The meetings come a month after the Treasury hired Morgan Stanley to advise on any potential use of taxpayer funds to recapitalise the beleaguered mortgage companies.

Investors have pressed for clarity on how any intervention would work, spelling out what would happen to current and future stockowners, bondholders and other creditors.

"We are making progress on our work with Morgan Stanley, FHFA and the Fed,'' Treasury spokeswoman Brookly Mclaughlin said in Washington.

Mr Bernanke participated in Friday's meetings because the central bank was given a consultative role in overseeing Fannie's and Freddie's capital under the July legislation.

The Fed chief said on July 15 that Mr Paulson would have the right to make changes in the two companies' management.

Treasury powers

Mr Mudd and Mr Syron must approve any government intervention under the law, unless the FHFA declares that either company has insufficient capital.

The legislation gave the Treasury the power until the end of next year to extend unlimited credit to or make equity purchases in the companies.

The Wall Street Journal reported earlier that Mr Paulson was close to completing a plan that included changes of senior management, according to an unidentified source.

The Journal also said the plan involved what it called a creative use of the Treasury's powers, without citing anyone.

FHFA spokeswoman Stefanie Mullin declined to comment, as did Mark Lake at Morgan Stanley.

Bloomberg