Treasury Secretary Henry Paulson and FHFA Director James Lockhart made the official announcement today that the government will be taking over the two mortgage giants Fannie Mae and Freddie Mac.

The takeover includes an unlimited supply of money that is designed to help Fannie and Freddie increase liquiditability and help strengthen the residential housing market.  It also allows the Treasury to purchase mortgage backed securities that are originated by the two mortgage giants.

Paulson stated "If the Treasury can hold the securities to maturity, taxpayer losses shall not occur, in fact the program could produce gains."  My guess is that the Treasury will not be able to hold onto a good percentage of the securites as they plan to and this could cost taxpayers hundreds of thousands if not millions of dollars.

Also, James Lockhart has already replaced CEOs at the mortgage giants.  Herb Allison will be taking over Fannie Mae and David Moffett will be taking over Freddie Mac.  Other high ranking management positions at the two companies are not currently in jeopardy.

I believe that putting these two mortgage giants in conservatroship is just another move that prolongs the inevitable failure of Fannie and Freddie.  The more involved the government becomes in the private sector of the mortgage and housing markets the longer it will take for the market to correct itself naturally.

Here is more information about the at take over of Fannie Mae and Freddie Mac and a video from MSNBC explaining the impact on the housing market.