First We Save--Then We Decide What It Is We Have Saved

Treasury to Rescue Fannie and Freddie Regulators Seek to Keep Firms' Troubles From Setting Off Wave of Bank Failures

By Zachary A. Goldfarb, David Cho and Binyamin Appelbaum Washington Post Staff Writers Sunday, September 7, 2008; A01

The Bush administration yesterday prepared to take over the troubled housing finance companies Fannie Mae and Freddie Mac, after concluding the companies don't have enough capital to continue to play their crucial role funding home mortgages.

Under the plan, engineered by Treasury Secretary Henry M. Paulson Jr., the government would place the two companies under "conservatorship," a legal status akin to Chapter 11 bankruptcy. Their boards and chief executives would be fired and a government agency, the Federal Housing Finance Agency, would appoint new chief executives.

The action, which would be one of the most sweeping government interventions in private financial markets in decades, is planned for today, according to several sources.

. . . The plan wou…