U.S. Weighs Takeover Plan for Two Mortgage Giants

New York Times (07/11/08) P. A1; Labaton, Stephen; Weisman, Steven R.
With Fannie Mae and Freddie Mac's shares down 30 percent and 45 percent, respectively, in a week's time, senior Bush administration officials have initiated discussions about what do in the event that one or both of the government-sponsored enterprises fails. Although they insist the GSEs are well capitalized for the time being and a crisis is not imminent, there is talk that the government could take control of one or both of them and put them under a conservatorship--which would erode their stock values and make taxpayers responsible for losses--if necessary. The Bush administration also might push for legislation to explicitly guarantee the GSEs' debt, though experts note that the financial markets already expect a government bailout if a financial crisis were to occur.