The US government has seized control of the mortgage finance companies Fannie Mae and Freddie Mac in what could become the largest corporate bailout ever. The Treasury Department has pledged to provide as much as $200 billion to the companies as they cope with heavy losses on mortgage defaults. The two quasi-public companies own or guarantee just under half of the country’s $12 trillion in mortgage debt. Treasury Secretary Henry Paulson announced the bailout.

Henry Paulson: “Fannie Mae and Freddie Mac are so large and so interwoven in our financial system that a failure of either of them would cause great turmoil in the financial markets here at home and around the globe. This turmoil would directly and negatively impact household wealth, from family budgets to home values, to savings for college and retirement.”

The Republican and Democratic presidential nominees John McCain and Barack Obama both supported the bailout. Obama said the government needs to take steps to guard against Fannie Mae and Freddie Mac ultimately profiting from the government assistance.

Sen. Obama: “We have to protect taxpayers, not bail out the shareholders and management of Fannie Mae and Freddie Mac. It is a challenging situation that’s been festering for a long time. There are some community and regional banks with potential exposure, including those serving low-income communities. We’re going to have to carefully address those situations, but we must not allow government intervention to protect investors and speculators who relied on the government to reap massive profits.”