Let's start at the beginning....Freddie Mac and Fannie Mae were originally created by the US Congress in 1938 to free up money for mortgages. Both of these companies were privatized in 1968, but the implication has always been that the federal government was backing them up. The two companies together hold about 50% of the nations mortgages worth trillions of dollars.

How does this effect you, the consumer?

The government thinks that the takeover will bring down interest rates...the theory being that investors will feel more confident about buying mortgage backed bonds...which ultimately increases availability and lowers the costs of mortgage financing.

Who invests in these mortage bonds?

Consider this: Ten percent of China's gross national product is invested in mortgage giants Fannie Mae and Freddie Mac. Investors are out there. It's now up to the government to convince investors that their investments are safe.