Paulson described the Fannie-Freddie situation to me as follows. In July 2008, when Fannie and Freddie were beginning to fail, the Treasury asked for very expansive emergency powers. As Freddie and Fannie combined were nine times larger than Lehman Brothers and the dominant sources of mortgage financing during the crisis, they could not be allowed to fail. However, Paulson’s political people had told him that if they put a big dollar number in front of Congress for approval, Congress would likely get spooked. As Paulson couldn’t ask for unlimited authority to inject capital into the two GSEs,
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