Sept. 6 (Bloomberg) -- Presidential candidates Barack Obama and John McCain gave their support for federal action to rescue Freddie Mac and Fannie Mae while saying steps must be taken to ensure the mortgage giants don't keep passing losses off to taxpayers.

``It looks like the Bush administration is going to intervene with a bailout that could end up costing taxpayers billions of dollars,'' Obama, the Democratic nominee, said today while campaigning in Terre Haute, Indiana. ``These entities are so big and they are so tied into the housing market that it's probably true that we have to take steps to make sure that they don't just collapse.''

McCain said the Treasury Department's plan for a conservatorship for the loan agencies ``has to be done.''

``We've got to keep people in their homes. There's got to be restructuring, there's got to be reorganization, and there's got to be some confidence that we've stopped this downward spiral,'' McCain said in a recorded interview for CBS's ``Face to Nation'' program. CBS released excerpts of the interview, to be broadcast tomorrow morning.

Treasury Secretary Henry Paulson is preparing to announce plans to bring Fannie Mae and Freddie Mac under government control, seeking to halt the crisis of confidence in the companies that make up almost half the U.S. mortgage market.

Awaiting Details

At a news conference, Obama said he would wait to see the details of Paulson's full proposal before passing judgment. He also repeated his call for lawmakers to pass a second economic stimulus package, including assistance to state governments to help make up for losses of tax revenue.

Obama supported a move by Congress to give the Bush administration authority to inject capital into the two government-sponsored mortgage-finance companies. Arizona Senator McCain has decried using taxpayer funds to shore up Fannie Mae and Freddie Mac, though, like Obama, he says they can't be allowed to fail.

Obama, a senator from Illinois, said that companies can't be permitted to reap profits during boom times and then look to the federal government for help when the market goes awry.

``You notice a lot of these folks they don't like government when they are making money,'' Obama said at his campaign event. ``But as soon as they start losing money they think the government is just swell. We are going to change that attitude.''

Briefing by Paulson

Obama, 47, said he had a ``lengthy conversation last night'' with Paulson and today spoke with economic advisers Paul Volcker, a former chairman of the Federal Reserve, and Larry Summers, a former Treasury secretary.

He said Paulson told him the Treasury plan falls ``within the parameters'' of what Congress authorized and that no additional legislation would be needed.

McCain, 72, said in the CBS interview that he also spoke with Paulson, who assured him that when the housing market picks back up ``taxpayers are going to be the first to be paid off.''

Both candidates were critical of the management and operation of Fannie and Freddie.

McCain called the situation ``an example of cronyism, special interest, lobbyists, a quasi-governmental organization where the executives were making hundreds of, some billion dollars, a year while things were going downhill.''

At his news conference, Obama said the mortgage crisis is a ``challenging situation that's been festering for a long time,'' and there is ``no doubt that what was taking place in Fannie Mae and Freddie Mac was, in many instances, irresponsible.''

Obama, 47, said his benchmarks for evaluating the government intervention were that they must protect taxpayers and stabilize the mortgage market, they shouldn't protect investors who've profited from the risks taken by Fannie and Freddie and that they must ``clarify'' government housing policy to make sure the situation doesn't happen again.

Fannie's market capitalization is now $7.6 billion, down from $38.9 billion at the end of last year. Freddie's has fallen to $3.3 billion, from $22 billion over the same period.

Fannie and Freddie were created by Congress to boost home ownership and profit by holding mortgages and mortgage bonds as investments and by charging a fee to guarantee and package loans as securities.

To contact the reporter on this story: Kim Chipman in Terre Haute, Indiana at kchipman@bloomberg.net; Edwin Chen in Colorado Springs, Colorado, at 1844 or echen32@bloomberg.net

Last Updated: September 6, 2008 20:03 EDT