Fannie and Freddie: Is The Patient Gonna Die Anyway?

Have the US Treasury rescued Fannie & Freddie or provided a short-term fix that effectively passes the buck onto the next President?

There seems to be plenty of people around this morning that appear to think the latter.

Fannie fell 59 percent and Freddie dropped 56 percent in early European trading today. Fannie dropped $4.06 to $2.98 at 9:56 a.m. in Frankfurt and Freddie slumped $2.86 to $2.24, shares in both companies were over $65 less than a year ago, meaning share values in both have fallen around 96% in less than twelve months.

"The new Congress and the next administration must decide what role government in general, and these entities in particular, should play in the housing market," Treasury Secretary Henry Paulson said yesterday in Washington. There is a consensus now that "they cannot continue in their current form," he added.

"It's a good half a plan, but its still just half a plan," said Joseph Mason, a finance professor at Louisiana State University, who cautioned that the government needed to outline its longer-range plan for the two companies and the credit markets to restore greater confidence to markets.