The latest lenders to have their viability questioned in the housing finance crisis are Fannie Mae and Freddie Mac.

Their formal names are the Federal National Mortgage Association and the Federal Home Loan and Mortgage Corp., and both buy mortgages from commercial lenders. Of the $12 trillion in mortgages, Fannie and Freddie hold about $1.5 trillion and back another estimated $4.5 trillion.

They have the same problem as other mortgage holders: How much exposure is in solid loans and how much is squishy subprime-loan-based debt?

Fannie and Freddie are companies with special ties to the federal government. The Treasury gives them a small but exclusive rate, and implicit in the relationship is government backing of their obligations.

Now the price of their shares is falling and their borrowing costs are rising. These factors led to reports last week that the Bush administration was planning to take over either Fannie or Freddie or both.

Regulators said the speculation was premature and that the companies were adequately capitalized in spite of having recently lost an estimated $11 billion. Yesterday, the federal government announced a plan to extend its line of credit to the companies and make an equity investment, if needed. Given Fannie's and Freddie's relationship with the Treasury, a default on their debt is unlikely.

Falling share prices and rising borrowing costs are predictable phenomena in the housing market. It is also predictable that speculators will take advantage of the unrest to get what they can out of Freddie's and Fannie's stock. But there are some basic facts to keep in mind.

First, both companies are essential. Remove the coverage they provide commercial lenders, and the country goes back to a 1930s situation in which only the rich will be able to get reasonable terms on housing loans.

Second, the federal government needs to do what it can, short of a bailout, to support the two. A "take no prisoners" approach would further damage the economy's housing sector, with nationwide repercussions.

Third, little advantage would accrue from consolidating Fannie and Freddie. While neither is run with noteworthy efficiency, each employs only a few thousand people, they keep each other honest and any savings would be minimal.

The best course for the two would be simply to ride out the storm. There is no logic to having the taxpayer assume their obligations. Wall Street needs to forget about the trial balloon that it has floated.