Unknown to either company, however, the decision for a takeover had already been made. Mr. Lockhart last week started interviewing potential candidates to replace the top executives. On Thursday, the last day of the Republican convention, Mr. Paulson met with President Bush in the Oval Office. Mr. Bush said the Treasury plan had his support.
The next day, Mr. Paulson called Mr. Syron and Mr. Mudd to separate meetings at the offices of Mr. Lockhart without saying why. Freddie was still looking for fresh capital and interviewing people for senior positions. But in his meetings, Mr. Paulson said he intended to put both companies into conservatorship. As part of that plan, Mr. Syron and Mr. Mudd would both be required to step down.
Mr. Mudd pleaded with Mr. Paulson to spare Fannie Mae, people with knowledge of the meeting said. He said that he abided last spring with regulators’ demands to raise more capital, adding that the company was in better financial health than Freddie.
Mr. Paulson responded that Freddie was nearing a crisis and that, in the eyes of the markets, the companies were joined at the hip. He would not treat them differently for fear that similar problems, over time, would engulf Fannie Mae, but that time closer to the election. Mr. Paulson told both companies that they had no choice.
President Bush returned from Camp David, the presidential retreat, on Saturday morning. The Treasury secretary told him that the companies had reluctantly agreed to the plan. Shortly before 11 a.m. on Sunday, in a conference room across the hall from Mr. Paulson’s office, the Treasury secretary and Mr. Lockhart signed the documents that give each company access to up to $100 billion in taxpayer money to cover future losses — but also put Fannie and Freddie directly under government control.
Edmund L. Andrews and Gretchen Morgenson contributed reporting.
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