Paul Krugman: The Power of De

Save the home lenders, save the world? If only it were that simple.

The just-announced federal takeover of Fannie Mae and Freddie Mac, the giant mortgage lenders, was certainly the right thing to do — and it was done fairly well, too. The plan will sustain institutions that play a crucial role in the economy, while holding down taxpayer costs by more or less cleaning out the stockholders.

But Sunday’s action needs to be seen in a larger context — that of the attempt by the Federal Reserve and the Treasury Department to contain the fallout from the ongoing financial crisis. And that’s a fight the feds seem to be losing.