Paulson Tacks Toward Middle on Fannie, Freddie Rescue

As concerns mount for troubled mortgage giants Fannie Mae and Freddie Mac, two camps have emerged: one, led by free-market analysts, is pushing a temporary government takeover of the companies; the other, led by congressional Democrats, would rather see billions of tax dollars rescue the firms. Treasury secretary Henry Paulson is looking to balance the two extremes in an announcement this afternoon, the Los Angeles Times reports.

Paulson’s plan for a conservatorship of the companies would allow the firms to “finally focus on their housing mission. It won't be good for shareholders, but it will be good for housing,” said Rep. Barney Frank. But “if there's an injection of capital, that means Treasury will prop up Fannie and Freddie, they'll survive in pretty much their current form and the taxpayers will suffer," says a conservative analyst. (More Fannie Mae stories.)