It didn't take long for the federal bailout of Fannie Mae and Freddie Mac to become a political football that elected officials and policymakers tossed around to shape the larger debate about the health of the U.S. economy. They have also offered sharp, and at times conflicting, commentary about what caused the need for a bailout and what changes Congress should make to the mortgage finance giants during what Treasury Secretary Henry Paulson calls this "time out" to stabilize both GSEs.

The White House has been surprisingly muted about the takeover plan. During his 15-minute press conference on Tuesday, President Bush alluded only in passing to the government's intervention, which took a back seat to troop deployments in Iraq. That was in line with the President's terse statement about the takeover on Sunday, which endorsed the plan as "necessary" and "temporary," and said "Americans should be confident that the actions taken today will strengthen our ability to weather the housing conditions and are critical to returning the economy to stronger sustained growth in the future."

On Monday, Rep. Barney Frank (D-Mass.), chairman of the House Financial Services Committee, laid the blame for those "housing conditions" at the feet of the White House, which he says dragged its feet and opposed a bipartisan House reform bill in 2005. Even though President Bush signed the housing bill passed by Congress last year, "it is unfortunate that ideologues in the White House who opposed common sense regulation did not join Congress early enough to help prevent the financial firestorm that now threatens the entire economy," stated Frank.

The two candidates running to replace Bush in the White House are using the government bailout as a mirror to reflect their respective economic plans. Sen. John McCain (R-Ariz.) advocates a proposal, favored by former Federal Reserve Chairman Alan Greenspan (whom McCain has identified as his economic guru), for splitting up Fannie and Freddie into smaller entities, selling them to private investors, and extricating the government from any further involvement in mortgage financing. McCain does envision a role for the Federal Housing Administration in providing credit to home buyers who can't get a mortgage otherwise. That's pretty much what HUD Secretary Steve Preston advocated, too, in his statement on the GSE takeover. Preston used the bailout to plug his department's FHA and Ginnie Mae divisions, which "had grown dramatically in volume and market presence" during the recent credit crisis and are prepared "to safety handle increased volumes of mortgage insurance and mortgage-backed securities."

Sen. Barack Obama (D-Ill.) said on MSNBC's "Countdown" on Monday that both Republicans and Democrats were culpable for not paying closer attention to the "structural problem" of the GSEs. However, Obama also blamed the Bush Administration's "anything goes" aversion to regulation, which he insists allowed Fannie and Freddie "to sink deeper into debt before the scope of their difficulties was recognized." On ABC's "This Week," Obama stated, "The news with Freddie Mac and Fannie Mae, along with the unemployment numbers, indicates that we're fragile. I want to accelerate those tax cuts through a second stimulus package, get more money into the pockets of ordinary Americans, see if we can stabilize the housing market, and then we're going to have to re-evaluate at the beginning of the year to see what kind of hole we're in.”

Obama said he has written letters to Paulson and Federal Housing Finance Agency director James Lockhart objecting to the multimillion-dollar severance packages that Fannie and Freddie's former CEOs are entitled to receive. (The Los Angeles Times reports that Obama himself was the largest recipient of the GSE's largesse, having received about $112,000 in campaign contributors from Fannie and Freddie employees since 2005. McCain has taken $16,400.)

The dominant voice speaking about the government takeover, for the time being at least, continues to be Paulson's, who sees Fannie and Freddie as "unique" institutions whose ambiguous Congressional charters—which encouraged the perception that the government would support their debt and securities—created this mess and need to be resolved. "Our nation has tolerated these ambiguities for too long, and as a result, GSE debt and [mortgage backed securities] are held by central banks and investors throughout the United States and around the world [that] believe them to be virtually risk free."

The authorities Congress gave the Treasury over the GSEs expire in December 2009. Paulson urged policymakers and elected officials to use this time wisely and with urgency to address "the inherent conflict [within the GSEs' structure] of attempting to serve both shareholders and the public mission" of providing mortgage liquidity. "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." He added that policymakers must also address the issue of the GSEs' "systematic risk."

Whether either presidential candidate is listening to this advice remains to be seen.

John Caulfield is a senior editor at BUILDER magazine.

Learn more about markets featured in this article: Los Angeles, CA.