Treasury Secretary Henry Paulson told Congress today (July 10) that government-sponsored housing behemoths Fannie Mae and Freddie Mac are "adequately capitalized." Paulson's nose immediately became as long as a broomstick. At the time, the stock market was knocking Fannie down 13 percent and Freddie 23 percent on the day. Over the last 12 months, Fannie stock has plunged 80 percent and Freddie 90 percent. Former St. Louis Federal Reserve President William Poole was honest: he said both Fannie and Freddie are insolvent. Between them, Fannie and Freddie own or guarantee $5 trillion of U.S. mortgages, nearly half the amount outstanding. Not only that, Fannie and Freddie securities are in portfolios all over the world. The government will back them. Poole thinks they will be nationalized. (They are quasi-governmental now.) This will be the second big bailout of the year. In March, the Federal Reserve forced a merger of Wall Street gambling den Bear Stearns and JP Morgan Chase on the ground that the stock market would plunge 2,000 points if Bear had gone into bankruptcy. (Nobody knew that; officials just kept repeating it. Actually, Bear should have been put into bankruptcy.) However, letting Fannie and Freddie go under is unthinkable. Expect a rescue. You'll be paying for it.