UPDATE 2-Treasury near GSE bailout plan -Wall St Journal

(Adds Fed declined to comment, analyst comment, stock and bond movements, background)

By Glenn Somerville and Al Yoon

WASHINGTON/NEW YORK, Sept 5 (Reuters) - The U.S. Treasury Department is close to finalizing a plan to buttress mortgage finance companies Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research), The Wall Street Journal reported on Friday.

Citing people familiar with the matter, the Journal said the plan was expected to involve a creative use of authority the Treasury won in late July to pump capital into the two government-sponsored enterprises if it believed it was necessary.

The report said the plan, which could be announced as early as this weekend, includes changes to senior management at both companies.

Shares of the GSEs, the largest providers of money to U.S. home mortgages, have plunged about 80 percent since mid-May as investors speculated steep losses from the housing slump would soon create shortfalls in capital needed for them to stand on their own. Conventional wisdom has been that an investment by Treasury would explicitly back the companies' $1.6 trillion in debt, but leave their shares worthless.

"People have priced in an equity infusion that would wipe out shareholders," said Chuck Gabriel, managing director at Washington-based consultants Capital Alpha Partners. "On the other hand, they have come to understand you wouldn't have such an event without the GSEs agreeing to it."

The housing bill signed into law by President George W. Bush requires the companies agree to a Treasury backstop, he said.

Shares of Fannie Mae and Freddie Mac, which had rebounded since Aug. 21 on speculation a government intervention might be averted, plunged in after-hours trading in New York. Fannie Mae stock fell 16.9 percent to $5.85, while Freddie's shares declined 7 percent to $4.74.