The U.S. government’s proposed bailout of Fannie Mae and Freddie Mac, the government sponsored but  shareholder owned and run mortgage giants, poses new questions for both Republican John McCain and Democrat Barack Obama.

The government plan, announced Sunday before the U.S. markets opened Monday morning and had a chance to react, could end up costing taxpayers billions of dollars. Part of the plan calls for the Treasury to buy shares of both Freddie and Fannie at a time when the housing market has fallen off a cliff.

Some critics are already charging the plan is more indicative of a socialist state than a capitalist one such as the U.S.

As a Republican, McCain should, of course, be against government bailouts of private businesses while Obama should favor it.

The harsh reality

But the harsh reality is, Freddie and Fannie are so huge–together they own or back up nearly half of all mortgages in the U.S.–the government can’t afford to let them fail. The shock waves could cause a financial meltdown on a truly global scale.

Fannie and Freddie buy up mortgages from banks and other lenders then either keep them for their own portfolio or repackage them to sell as securities to investors.

This is the second time in recent months the government has come to the rescue of private business–Bear Stearns, the investment bank, was the first. The government is also starting to get deeper into the student loan business as private banks are dramatically cutting back loans to students.

So it is only fair for both presidential candidates to clearly explain what their vision is of such government rescue missions. And sooner rather than later.