The takeover was a condition of
formally guaranteeing that the two controversial government-sponsored
entities can continue to meet their massive $5 trillion in debt
obligations and continue their role as the primary source of funds for
new mortgages in the U.S. Though billions could be needed and the
intervention is sure to be one of the largest federal interventions
ever in the financial markets, the exact cost to the federal government
depends on how much capital the GSEs need in the coming year. According to The Wall Street Journal, "The Treasury will acquire $1 billion of preferred shares in each company without providing immediate cash, and has pledged to provide as much as $200 billion to the companies as they cope with heavy losses on mortgage defaults."
Treasury Secretary Henry Paulson spoke on
NPR about the bailout: "Well, our objective here is to prevent a serious risk to the financial
system, which would hurt all taxpayers because our financial system is
just critical to our overall economy."
The move to put them under
conservatorship of their regulator, the Federal Housing Finance Agency,
comes after months of speculation that the two GSEs' deteriorating
mortgage portfolio would lead to default on their obligations, forcing
the government to bail them out. Since the beginning of 2008, concerns
that a bailout would be necessary caused the stock of the companies to
lose more than 80% of their value. - Bill McConnell
Also see:
The Deal.com's: Fannie Mae, Freddie Mac seized
Treasury Secretary Henry Paulson on NPR
The Wall Street Journal story
After a weekend of negotiations,
federal regulators took control of mortgage securitization giants
Fannie Mae and Freddie Mac Sunday morning. Read the full story on TheDeal.com. 
