Fannie/Freddie were used to save the TBTF banks by dumping the bad loans on us at our expense. The TBTF banks came out smelling like roses AND we took the fall as the bad guys.
I think it was all part of the master plan to euthanize F&F. It was said early on that they could have gotten the funds needed to stem the tide in 2008 without having to turn to the government. The plan was to make them turn to the government. Paulson's "head hitting the floor" comments can only be interpreted in one way....and it was nefarious.
Management at Fannie chose to invest profits - nearly 1B - in PLMBS as a great way to earn high interest
When those collapsed it was ugly
The argument that F and F did not need help includes the argument that it was wrong to mark to market their own paper and the TONS of PLMBS paper they owned .. as their values plunged
By GAAP rules then in place ---- F and F were in trouble all on their own as this was the requirement of all companies
One can arrgue that legitimately from both sides in hind sight but the need for action appeared clear to the GOV --- not as much for F and F to pay the bills but to AVOID any appearance of trouble ahead as Russia and China owned a ton of our paper (that is what happens when Bush adds Part D - invades IRAQ - cuts taxes - and does nothing to contain the soaring deficit thus created)