Fannie Mae and Freddie Mac serve a useful and important function. Without them far fewer Americans would find a way to home ownership.

Today Treasury Secretary Hank Paulson, placed the two institutions in a federal conservatorship as authorized by Congress and announced:

1. The replacement of their CEO's.

2. As much bailout money as needed to keep them afloat.

3. A short term plan that will allow them to grow slightly and a long term plan to substantially reduce their overall size and potential impact on the economy.

4. The Treasury Department itself will become a long term supplier of capital to the mortgage business.

5. The Treasury Department will become a buyer of billions of dollars of mortgage securities on the open market.

In short, the Federal Government is now solidly in the mortgage business. Aside from Libertarians who will be having protracted nightmares, it is a rational response to the mortgage crisis and the deregulation that led to to that crisis.

Just don't call it big government or creeping socialism, after all these are Republicans in the driver's seat.

--for more, see this in the NYT and this in the LAT
--for a view of the complexities of the task going forward see this.
--and foreign policy implications toward the end of this.