Fat Fannie and Freddie

The rapid deterioration of Fannie Mae's and Freddie Mac's financial health made a federal takeover of the mortgage giants inevitable. Yet it still seemed sudden when the government swooped in over the weekend, putting the companies under the strict control of its federal regulator to avert an even larger taxpayer-funded bailout. Just two months ago, officials at the Treasury Department and the Federal Reserve tried to reassure Fannie and Freddie shareholders by offering to shore up the companies with low-interest government loans and, potentially, an investment in their stock. They said the companies held enough money in reserve and that no further action was likely to be needed -- an argument backed by the companies' regulator but hotly disputed by Wall Street analysts and other experts.

September 9, 2008