In an effort to finally clean up the last of the mortgage mess, the government takes on Fannie Mae and Freddie Mac.

The U.S. housing market has been in a disastrous decline for months. With many people unable to pay their mortgages and countless homes getting foreclosed, one of the worst things that could happen was the instability of two of the country’s major mortgage backers.

The US Treasury has realized the danger in this situation and over the weekend announced the massive bailout of these old, funny-named institutions.

These institutions, Fannie Mae and Freddie Mac (which have been around since the Great Depression), collectively back almost half of all the country’s $12 trillion in mortgages. Plus 70% of all new mortgages. So obviously, if these guys failed and went belly up there would be a lot more mortgage-related disasters to deal with.

So now it appears we’re ready for that forever-coming bottom. We’ll finally be able to dust ourselves off and watch the housing market regain stability. At least, that’s what everyone’s hoping for anyway. And to be perfectly honest, the number of times I’ve heard a pundit or an analyst exclaim ‘this is the bottom’ in the last 10 months have been too many to count.

Wall Street and the world’s stock exchanges seem pretty excited about it, though. Since the takeover was announced, Hong Kong, Japan, Germany, France, South Korea, and Britain’s major exchanges have seen large increases. Everyone seems to be smiling and happy again. Most are reacting favorably, “A job well done, and a great bailout to tell the grand-kids about.” Unfortunately, and this was always going to be the case, the US taxpayers are the ones who will be paying for it in the long run.

Alas, no one will be happy to know that the CEOs of both Freddie and Fannie will be walking away with $10-$20 million apiece in ‘goodbye money‘, which the taxpayer will be responsible for. But that’s the business, kids. “Deal with it”, they say.

Let us know your opinions on the bailout — Do you agree with the glowing reviews of Paulson’s plan or are you of the belief that ‘the US is more communist than China‘ after hearing this?

CNN Money: Why WallStreet Loves The Bailout, September 8, 2008

BusinessSheet: Fannie, Freddie Bailout Plan Brillinat: Kudos To Paulson, September 7, 2008

Bloomberg: European Stock Climb on News Of Fannie And Freddie, September 8, 2008

Consumerist: Nobody Panic: Government Seizes Fannie and Freddie, September 8, 2008