With Fannie Mae and Freddie Mac in a shaky state, The New York Times reports that the Bush administration is mulling "a plan to have the government take over one or both of the companies and place them in a conservatorship if their problems worsen," or possibly "an explicit government guarantee on the $5 trillion of debt owned or guaranteed by the companies." Philip Klein comments:

When [Freddie Mac was] created in 1970, Fannie and Freddie were granted a relatively modest $2.25 billion line of credit from the government. Though they have never dipped into it, the implicit government backing has allowed them to finance bond purchases at cheap rates. The whole idea was to boost home ownership by spreading risk around so that mortgage lenders were more comfortable issuing loans knowing they would be backed by Fannie and Freddie. Of course, what this translated into was companies issuing loans to people who weren't credit worthy enough, and instead of risk getting spread out, it actually became heavily concentrated into these two companies.

While neither of these mortgage financiers loan money directly to consumers, they hold the bundled mortgages from the companies that do, and as a result own or back more than half of the nation's $12 trillion in mortgage debt. Nationalizing their debt, on top of the tremendous potential costs involved, would mean the federal government ultimately owning a massive portion of American homes.

John McCain, sadly, has already come out in favor of some kind of bailout for Fannie and Freddie.

Obama, meanwhile, is staying vague. Fannie and Freddie insist that there's no crisis. And -- oh, yeah -- the feds just took over a teetering Pasadena-based bank.