Megan McArdle, the libertarian economics blogger at the Atlantic, on the Fannie Mae and Freddie Mac troubles. She titled her post “Too big not to fail.” The post is pretty comprehensive and provides a lot of information and analysis on the subject.
From the link:
In my view, the central problems with FM/FM are two:
1) Because they are government sponsored, the government let them get away with practices that would never fly in the private market. Contrary to the belief of many on the left, this is par for the course; just take a look at what’s happening to state and local government pensions now that the federal government has forced them to account for their liabilities like normal pension funds do.
2) They are too big not to fail. Their mortgage portfolios cover so much of the market that any significant problems in the mortgage market will make them technically insolvent as soon as they mark their securities to market. Any attempt to clean up their portfolios, by, for example, selling off some of their underperforming securities, will move the MBS markets against them, making the problem worse.
It’s not clear that bringing them fully into the government is even a second- or third- best solution; the government is not set up to be a hedge fund, nor should it be. Once the immediate crisis is over, it’s time to strip their GSE status and break the companies up into less risky firms.
David Kirkpatrick 
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