Morgan Stanley (MS) confirmed on Tuesday earlier rumors suggesting that it had been retained by the Department of the Treasury to provide capital markets advice to support the Treasury’s responsibilities associated with its new authorities regarding Fannie Mae (FNM) and Freddie Mac (FRE). The recent housing bill signed by President Bush at the end of July provides the Treasury historic authority to backstop both ailing GSEs, including an unlimited expansion of a preexisting $2.25 billion credit line to both Fannie and Freddie. The government also has the authority to purchase shares in one or both GSEs, if needed. Read full story here. As part of the assignment, Morgan Stanley said it will “support the Treasury’s work to promote market stability and the availability of mortgage credit.” The company provided no further details, and declined to provide further information on the nature of its work. “Morgan Stanley is honored to have been asked to serve as financial advisor to the U.S. Treasury as it evaluates various alternatives for Fannie Mae and Freddie Mac,” said Morgan Stanley CEO John Mack. “We are pleased to be able to offer our services to the government and look forward to working with Secretary Paulson and his team as they work to restore stability to the global capital markets and confidence in the U.S. housing market.” Morgan Stanley said it will accept no fees for its assignment, and will receive only $95,000 from the government toward its expenses. Sources that spoke with HW could only muster an obvious remark in response to the news: “What, you mean Paulson didn’t hire Goldman for the job?” said one source, a senior executive at a national commercial bank that asked not to be named in this story. Disclosure: The author was long FRE, and held no positions in FNM or MS when this story was published; indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.