Supporting Fannie and Freddie The news was bleak for housing at the end of last week after investor concerns sent shares of mortgage giants Fannie Mae and Freddie Mac downward.

But on Sunday, the Treasury Department and Federal Reserve announced a plan to save the two government-sponsored enterprises (GSEs).

"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," said Treasury Secretary Henry Paulson.

I commend Paulson and Fed Chairman Ben Bernanke for taking quick action to prevent a potentially dire situation.

The three-part plan includes a temporary increase in the line of credit the GSEs have with Treasury. The Treasury would determine the terms and conditions for accessing the line of credit and the amount to be drawn. To ensure the GSEs have access to sufficient capital to continue to serve their mission, the plan includes temporary authority for the Treasury to purchase equity in either of the two GSEs if needed. And to protect the financial system from systemic risk going forward, the plan strengthens the GSE regulatory reform legislation moving through Congress by giving the Federal Reserve a consultative role in the new GSE regulator's process for setting capital requirements and other prudential standards.

Shares of Fannie Mae and Freddie Mac began to rise early Monday in the wake of the Treasury announcement.