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Paulson's 'bazooka' backfires
Paulson's 'bazooka' backfires
Actions speak louder than words, Mr. Paulson. As shares of Fannie Mae and Freddie Mac plunge in mid-July on worries about their viability, Treasury Secretary Henry Paulson assures Congress that merely promising to give the beleaguered mortgage lenders access to Treasury funding would calm market fears - at no cost to Uncle Sam.

"If you've got a squirt gun in your pocket, you may have to take it out," Paulson tells legislators. "If you've got a bazooka and people know you've got it, you may not have to take it out."

Congress delivers the bazooka, but investors aren't buying it. Two months later, Treasury takes over both companies in a move that could cost taxpayers billions of dollars. -- By Colin Barr, Fortune senior writer

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NEXT: Fannie's delusions of grandeur
Last updated December 31 2008: 10:36 AM ET
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