The US Treasury and Federal Reserve have unveiled sweeping steps to possibly bail out the nation’s two largest mortgage lenders Fannie Mae and Freddie Mac. Treasury Secretary Henry Paulson said that the government would inject billions of federal dollars into the mortgage groups and pledged to buy stakes in the two companies should market conditions worsen.

Henry Paulson: “As you know, Fannie Mae and Freddie Mac play a central role in our housing finance system and must continue to do so in their current form as shareholder-owned companies. Their support for the housing market is particularly important as we work through the current housing correction.”

Many economists fear a collapse of Fannie Mae and Freddie Mac could lead to a meltdown in global financial markets. The two quasi-public companies own or guarantee just under half of the country’s $12 trillion in mortgage debt. Shares of the two companies dropped about 45 percent last week and are down more than 80 percent over the past year. The Financial Times reports an outright government takeover of Fannie Mae and Freddie Mac could increase the national debt by $5 trillion.