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Fate Of Fannie, Freddie Left To Next Administration

The Bush administration Sunday seized the two housing finance giants that together own or guarantee about half of the nation's home loans. David Wessel, economics editor of The Wall Street Journal, talks with Renee Montagne about the timing and scope of the federal government's takeover of Fannie Mae and Freddie Mac.

He says there was no single precipitating factor for the takeover. The Treasury Department concluded that Fannie Mae and Freddie Mac simply couldn't raise enough money privately soon enough to keep the mortgage market afloat, so it decided that "acting sooner rather than later was the best thing for the economy."

"The story has reached a crescendo, the companies have been shot in the head and the government has taken them over," Wessel says. "But the Treasury did not say what it thinks should happen now. ... The next Congress and the next president are going to have to decide what to do with them. Do they remain wards of the state, or are they carved into 10 pieces and sold off as independent, private companies?"

Among the losers in the plan are the shareholders of the two companies, their CEOs, who were ousted — and the taxpayers, who have taken on a huge obligation, Wessel says. The big winners, he says, are the people who hold debt in Fannie Mae and Freddie Mac, and if the plan works, the overall economy and homeowners, too.

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