July 13 (Bloomberg) -- Fannie Mae and Freddie Mac, the largest providers of U.S. mortgage financing, are in a ``sound situation,'' said Senator Christopher Dodd.

``They have more than adequate capital, in fact more than the law requires,'' Dodd, a Connecticut Democrat who is chairman of the Senate Banking Committee, said on CNN's ``Late Edition'' today. ``They have access to capital markets. They're in good shape.''

``To suggest somehow they're in major trouble is not accurate,'' Dodd said.

The two companies' shares reached the lowest level in more than 17 years on July 11, making it tougher for them to raise capital at a time when they account for about 80 percent of mortgages packaged into bonds. A failure of the companies would likely send mortgage rates higher, causing further declines in home sales and prices.

The companies are in talks with Treasury, Federal Reserve and White House officials to come up with funding plans should they require financing, according to people with knowledge of the discussions.

Freddie Mac is scheduled to sell $3 billion in short-term notes tomorrow. The plans being discussed may include providing capital in case the McLean, Virginia-based company can't find enough investors for the debt, said the people, who declined to be identified because the negotiations haven't been announced.

`Different Options'

The U.S. government during the next few days will be ``exercising a lot of different options that it has available to ensure that they don't get into a financial situation where they can't cover their obligations,'' Arizona Senator Jon Kyl said on the CNN program.

``We should be worried'' about Fannie Mae and Freddie Mac, Republican Kyl, a member of the Senate Finance Committee, said. Fannie Mae and Freddie Mac own or guarantee about half the $12 trillion in U.S. home loans outstanding.

Democratic presidential candidate Barack Obama left open the possibility that the Federal government won't need to take any steps to aid Fannie and Freddie, saying it needs to watch the evolving situation before making a decision.

``I think we need to watch carefully to see how it plays out before we make a decision about which steps need to be taken, if any,'' Obama, 46, said aboard his campaign plane from Chicago to San Diego late Saturday. It was the first time Obama, an Illinois senator, addressed concerns over the stability of the two companies.

Paulson Comments

Treasury Secretary Henry Paulson said in a July 11 statement that ``our primary focus is supporting Fannie Mae and Freddie Mac in their current form.'' The government-sponsored enterprises have federal charters and are shareholder-owned companies.

Shares of the two companies closed lower, with Fannie Mae losing $2.95 to $10.25 and Freddie Mac down $0.25 at $7.75 in New York Stock Exchange composite trading. Washington-based Fannie Mae's market capitalization has fallen to $10.1 billion from $38.9 billion in December, according to Bloomberg data. McLean, Virginia-based Freddie Mac's total has slumped to $5 billion, from $22 billion over the same period.

To contact the reporter on this story: Justin Blum in Washington at jblum4@bloomberg.net.

Last Updated: July 13, 2008 14:36 EDT