The government finally stepped in and seized Fannie Mae and Freddie Mac, putting it out of its housing bubble induced misery.   The news is everywhere:

The Wall Street Journal Writes:

In its most dramatic market intervention in years, the U.S. government seized two of the nation's largest financial companies, taking direct responsibility for firms that provide funding for around three-quarters of new home mortgages.

The NY Times Writes:

The Treasury Department on Sunday seized control of the quasi-public mortgage finance giants, Fannie Mae and Freddie Mac, and announced a four-part rescue plan that included an open-ended guarantee to provide as much capital as they need to stave off insolvency.

The Financial Times:

The US government on Sunday seized control of the troubled Fannie Mae and Freddie Mac mortgage groups in what could become the world’s biggest financial bail-out.

The government’s move, its most dramatic since the start of the credit crisis, is aimed at ensuring the two groups’ woes do not cripple the country’s housing market or worsen to the point that they fail and send shockwaves through global markets.

So, there you have it.  The government has seized control in the world's largest financial bailout.  Although the true cost of the bailout is not known, it is expected to be in the tens of billions of dollars, if not higher.  Since its inception Fannie Mae and Freddit Mac have operated as quasi-governmental institutions, meaning the Federal government provided a guarantee that the company would never default on the mortgage debt it packages and sold.  This allowed the company to take on much risker behaviour than it should have, behavior that led much of the freewheeling, free money days of the housing bubble.

Many got rich.  From investment bankers, to hedge fund managers, to foreign governments, who purchased many of the bonds issues by Fannie or Freddie.

But now the bill has come due and it turns out the system didn't work properly.  Much of the money flowing in and out of Fannie and Freddie was crap.  But everyone was making so much money, they didn't want to stop the music.  Well, the music has stopped and guess who's going to pay - all of us.

We're going to pay for the homeowners who borrowed far more than they knew they could ever afford.  We're going to pay for the banks who gave a loan to anyone with a pulse.  We're going t pay for the investment banks to gleefully packaged mortages and mortage-related securities into exotic financial instruments that turned out to not be that exotic, but rather quite toxic.

You'll read from other financial mags about how investors are going to take a pounding: 

Big investors in Fannie Mae and Freddie Mac face a brutal Monday. Shares in the mortgage giants, which have already lost 90% of their value over the past year, are likely to plunge anew in the wake of the government's announcement Sunday that it is taking control of the companies and ending the payment of common and preferred dividends," says Colin Barr, writing in Fortune.

Investors should have known better.  Anyone with sense could see that  Fannie and Freddie were going under.

Other business mags will tell you that bond investors are breathing a sigh of relief, comfortable that their investments will not default.  The WSJ writes: 

"The federal takeover of the mortgage giants was initially welcomed by banks and market watchers outside the U.S. as a way to dispel some of the uncertainty roiling the world's financial markets. The intervention could eventually be a boon for Wall Street, by providing a boost to the moribund mortgage industry and by perhaps diminishing the influence of Wall Street's two largest competitors in the market of packaging and reselling mortgage-backed bonds."

The Treasury Department has earmarked $200 billion to stabilize Fannie and Freddie.  Hopefully it won't that much although no one really knows. It  could be more and if so, the government will kick in more.  Except it's not the government, it's all of us, the taxpayers.

Now, maybe this is all good and well and needs to be done.  Perhaps letting Fannie and Freddie go under would have been catastrophic for the global economy.  But it needs to be made clear that the ultimate backstop, the people providing the capital to keep Fannie and Freddie running are the American taxpayer.  We're all going to have to pay the bill, even if we never engaged or benefited from the risky behavior that led to the their titanic downfall.