There are two videos that help explain how and why the US Government seized control of Fannie and Freddie. Basically, the Treasury strong-armed everyone (WH, FHFA, Boards of Fan & Fred, etc.) into the takeover of these two private companies.
Watch the first video where Mr. Paulson admits this intimidation and strong-arming. The justification? Because “…it was just obvious…the companies are just too big…they are just really big.” Paulson also admits that the government takeover was of no fault by Fannie Mae and Freddie Mac and goes on to state that the money needed to support this takeover was not a consideration. This admission shows that Fan and Fred did not need cash injection because the takeover was not about insolvency. Paulson does state that once the companies return the capital injected that the profits would be returned to shareholders.
The second video puts the takeover of these two private companies into the context of “systemic failure.” A systemic failure that Paulson was trying to avoid, but a failure that some state he helped create. Watch both videos and judge for yourself whether Fannie Mae and Freddie Mac deserved to be taken over by the US Government and why — seven years later — they are still in conservatorship.
Paulson on Fannie, Freddie
CNBC 09/08/2008 15:33
“U.S. Treasury Secretary Henry Paulson discusses details of the government’s takeover of Fannie Mae and Freddie Mac on CNBC.”
Inside the Meltdown
Frontline PBS 02/17/2009 56:20
“How the economy went so bad, so fast and what Paulson and Bernanke didn’t see, couldn’t stop and haven’t been able to fix.”