First of all, U.S. Treasury secretary Henry Paulson wants you to know that the plan cooked up to backstop Fannie Mae (FNM) and Freddie Mac (FRE) wasn’t a spur of the moment thing, as the Wall Street Journal had suggested earlier in a wide-ranging look at the Treasury’s response to the ailing GSEs. “Our proposal was not prompted by any sudden deterioration in conditions at Fannie Mae or Freddie Mac,” Paulson said Tuesday in testimony to the Senate Banking Committee, suggesting that the move to backstop the ailing housing giants was made to restore investor confidence and maintain market stability. But which investors, and which markets? Paulson’s testimony made no mention of consideration for equity holders, saying only that “debt and other securities issued by the GSEs are held by financial institutions around the world.” His omission of equity markets likely signals his continued belief that any aid to the GSEs come at shareholders expense, sources suggested to HW. But will that sort of less-than-divine intervention really be needed, and if so, how much? Again, Paulson had little to offer in the way of answers. “Given the difficulty in determining the appropriate size of the credit line we are not proposing a particular dollar amount,” in referencing one of the two key pillars of the Treasury’s plan. “Flexibility is the best means of increasing market confidence in the GSEs, and also the best means of minimizing taxpayer risk.” He offered a similar lack of details over a plan to allow the government to purchase equity in the GSEs directly, saying only that the authority would be “temporary” and limited to 18 months — and that “there are no immediate plans to access either the proposed liquidity or the proposed capital backstop.” Paulson also see-sawed between lauding the financial strength of the GSEs, on one hand, and suggesting they posed systemic risk to the economy, on the other. Pointing to the OFHEO earlier in his testimony, he suggested that both Fannie and Freddie “remain adequately capitalized” but said that “we have long maintained that the GSEs have the potential to pose a systemic risk.” All of which left some of HW’s sources confused. “If The GSEs are adequately capitalized, how can they post a systemic risk?” asked one source, a banking executive that asked not to be named in this story. “If they are adequately capitalized, why push for equity purchase rights and scare the bejesus out of shareholders? “I don’t get it.” Only one man likely knows the answer to such questions. And, for now at least, he’s clearly not telling — even when he’s doing the talking. Disclosure: The author was long FRE when this story was originally published. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.