On Sunday I shared some initial thoughts about the Fed take-over of Fannie Mae and Freddie Mac. If you read it, you know I’m not exactly happy about the outcome.  My friend Bithead shared some great thoughts Monday, and I don’t disagree that something needed to be done.   He and I both agree dumping the CEOs was necessary.

And on Monday the Stock Market reacted very favorably to the news, with a huge rise in the Dow (500 points, settling up 289), with a strong positive impact to the banking industry.

But I’m still convinced that the solution divides the interests of those in the government now set to manage the affairs of these companies.  Everyone who looks at this right now is breathing …

Today US Treasury Secretary Henry Paulson announced plans for the new Federal Housing Finance Agency (FHFA) to take Freddie Mac and Fannie Mae into conservatorship.   The power to do this was provided in HR 3221 which was passed in July.

The move includes replacement of the CEO of both organizations, and an infusion of about $200 billion.  In return, the Treasury gets $1 billion in preferred stock from each company without providing the cash for it up front (I’m assuming this will work like a stock option).

From the Wall Street Journal:

It is unclear how much the government’s intervention will ultimately cost taxpayers. In exchange for agreeing to provide as much capital as needed to the companies as they cope with heavy losses on

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