"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
What do you think was the year's Dumbest Moment in Business?Join the discussion now.
NEXT: Fannie's delusions of grandeur