In the wake of the financial crisis exacerbated by the collapse of the housing market, the U.S. government intervened by placing Fannie Mae and Freddie Mac into conservatorship. These two government-sponsored enterprises (GSEs) had become increasingly burdened by rising mortgage defaults, primarily resulting from the subprime mortgage crisis. As the crisis unfolded, both companies faced immense pressure on their capital reserves, prompting fears of a complete financial collapse which would have wider repercussions for the American economy.

The takeover was executed by the Federal Housing Finance Agency (FHFA), which assumed control to preserve their operations and stabilize the housing market. Treasury Secretary Henry Paulson sought to restore confidence in the housing sector while minimizing taxpayer exposure to potential losses. Under conservatorship, both entities were provided with substantial financial backing from the Treasury, allowing them to continue purchasing and guaranteeing mortgages, which was essential for maintaining liquidity in the mortgage market.

This action was significant because both Fannie Mae and Freddie Mac were critical to the functioning of the housing finance system, as they provided access to mortgage credit for millions of American families. By stepping in, the government aimed to prevent a larger economic disaster that could ripple through banks and investors, further contributing to the credit crisis. The move was a pivotal moment in understanding the government's role in managing financial markets and protecting the economy during turbulent times.