In a surprise move, on Sunday the government announced plans to take over Fannie Mae and Freddie Mac, giving the government control over the $5 trillion they have acquired in home loans. The plan was announced by Treasury Secretary Henry Paulson and the director of the FHFA, James Lockhart. Fannie and Freddie will be put into a conservatorship to be run by the FHFA until they are more stable. This action will provide about $200 billion from Treasury support to Fannie and Freddie. Paulson remarked that, "A failure [of Fannie and Freddie] would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance,...And a failure would be harmful to economic growth and job creation." To date they have had almost $12 billion in losses since last summer.

Although the former CEOs of Freddie (Richard Syron) and Fannie (Daniel Mudd) were not blamed for the slide of the two corporations, they will be replaced and only stay to help smooth the transition. Fannie will be headed by Herb Allison, former chairman/CEO of TIAA-CREF, and David Morfett will take over Freddie. He is the former vice chairman/chief financial officer of U.S. Bankcorp until the start of 2007, where the then became a senior adviser of the Carlyle Group.

As this take over occurs, dividends on common/preferred shares will be eliminated, which should hopefully save $2 billion annually. All lobbying and political activities will be put on hold and all charity actions will be reviewed.

The Treasury and the FHA will also buy preferred stock in both companies to try and boost security and housing finance. For supporting the 2 firms, the government will be entitled to $1 billion per company, from their senior preferred stock, as well as getting a quarterly dividend payment and the chance to own 79.9% of each of the companies.