Is the federal government's bailout of Fannie Mae and Freddie Mac a necessary adjustment to stabilize the shaking credit and housing market?

Or does it herald inefficient and costly meddling of government in private enterprise?

It's probably both. But we didn't have much of a choice. These two companies have become so important to priming the housing market in Florida and elsewhere, we couldn't afford to let them fail, even if it costs the taxpayers tens of billions of dollars. Sounds a lot like the Savings & Loan crisis of 20 years ago.

Congress created the two companies to help more Americans buy homes. They now provide money for about 3/4 of all new home loans. They do so by buying loans from the private market. That's what got them into trouble. Countrywide Financial Corp., recently bought by Bank of America, supplied the most loans to Fannie Mae, about 29% of its business last year. Freddie Mac also relied on Countrywide, but to a lesser extent. As you know, Countrywide made tons of the risky loans that helped sink the housing market.

Though we dwell on the housing market here, the real estate and credit markets are obviously attached at the hip. I've got dozens of stories of house hunters who've found an inexpensive house but can't get a loan. Though exaggerated by builders and Realtors, the subprime meltdown last summer really did seem blot out the first rays of a tentative recovery.

Of course, it's one big chicken-and-egg quagmire: People bought overpriced homes with stupid, short-sighted loans. Prices necessarily fell. Unable to make their payments or refinance, people let homes drift into foreclosure. Banks lose their shirts and tighten credit. Home sales get worse.

Here's a pretty interesting take from the Wall Street Journal.