Fannie Mae and Freddie Mac bailout

Fannie and Freddie: The Bush administration said Sunday that it was taking control of the mortgage backers in an attempt to help stabilize the battered housing market and bring down mortgage rates.
Treasury Secretary Henry Paulson said the companies were being put under a government conservatorship and both chief executives were being replaced. The Treasury Department will put up to $100 billion in each company over time to keep them afloat, in exchange for senior preferred stock.
Both the common and preferred shares of the companies plummeted.
The two government-sponsored firms own or back about half the mortgage debt in the country and have lost billions in the housing market collapse. The plan should lower mortgage rates by lowering Fannie and Freddie's borrowing costs.
But analysts are split as to how much the plan will be able to help the battered housing market and sluggish economy. (Full story)
While the announcement has a psychological impact, it is not the ultimate solution to what ails the housing and credit markets, said William Rutherford, president at Rutherford Investment Management.
"If banks are going to continue to be tight in their lending policies and if we don't get a stabilization in housing prices, I don't think we can turn the economy and the housing market around," he said.
Additionally, he said, investors are still contending with cash-strapped local and regional banks, not to mention the global economic slowdown.