Paulson’s big Fannie-Freddie gamble

Will the federal takeover of the mortgage giants save the economy?

The details of the U.S. government takeover of mortgage giants Fannie Mae and Freddie Mac are complex, said Steven Pearlstein in The Washington Post, but “the rationale is quite simple: to restore some semblance of normalcy to the housing market.” That’s the bet that Treasury Secretary Henry Paulson is making in wresting control of the two public-private hybrid firms and “permanently changing the landscape of housing finance in America.”

It’s impossible to say how much Paulson’s bet will cost taxpayers, said Peter Coy and Theo Francis in BusinessWeek.com. Initially, it could be up to $200 billion, but if the housing market rebounds, it could cost taxpayers little or nothing. Either way, nationalizing the two giants is “a dramatic move” for a free-market conservative government.

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