I wish I felt like joining the party that sent the Dow Jones Industrial Average up nearly 300 points on Monday on news of the Treasury plan to put mortgage giants Fannie Mae and Freddie Mac into a "conservatorship."

Not that I disagree with Treasury Secretary Henry Paulson's approach. People can and will argue about the details, such as whether the huge government-sponsored mortgage companies should have been put into receivership, wiping out shareholders, rather than being allowed to linger on as New York Stock Exchange-traded companies trading like penny stocks. But the important thing is that decisive action was taken.

Still, this is good news only in contrast to letting the companies flounder and setting off a global financial crisis. The best news would surely have been Mr. Paulson's Plan A, which would have required no action beyond his earlier guarantees of the companies' debt and a vague pledge to supply capital if needed. Under that rosy scenario, mortgage markets would have stabilized by now, along with confidence in Fannie and Freddie, and the two could have raised capital on their own. The reality was that home prices continued to plummet and mortgage defaults kept soaring, further eroding the value of mortgage-backed securities and dooming Fannie and Freddie.

Mr. Paulson said the companies will no longer be managed as though they had a fiduciary duty to shareholders. So in whose interests will they be managed? Those of the taxpayers, who are on the hook for billions in losses? Those of the banks who need Fannie and Freddie to keep buying mortgage securities? Those of real-estate agents and home builders, who want the companies to prop up real-estate values? Those of affordable-housing advocates, who want easier lending and underwriting policies so more people can own homes?

Unfortunately the answer cannot be all of the above, since too many of these interests are in conflict. Trying to serve all these masters is what got Fannie and Freddie into this mess. It's a fiction that the companies ever were managed with a fiduciary duty to shareholders, as anyone unlucky enough to own their shares now realizes.

In their heydays, Fannie and Freddie certainly helped prop up home prices. Surely on that score none of their allies in Congress can complain. They were part and parcel of a system that fueled a real-estate bubble of historic proportions. The result was millions of people who bought houses for more than they were worth and at prices they couldn't afford. Where's the public benefit in that?

A legitimate cause for celebration will be signs that the nation's housing market has hit bottom and begun to recover. Mortgage default rates are going to keep rising as long as people are being asked to make payments on mortgages that are greater than the values of their homes.

Are there any glimmers of hope? The National Association of Realtors said on Tuesday that pending home sales dropped again in July, dashing expectations of a continuing rebound after positive results in June. And prices of existing homes fell 7.1% in July. Indeed, the DJIA fell 280 points Tuesday on renewed concerns about financial stocks and the housing market.

The only good news there is that the faster housing prices fall, the sooner they will hit bottom, at which point we'll at least know the extent of the disaster.

James B. Stewart, a columnist for SmartMoney magazine and SmartMoney.com, writes weekly about his personal investing strategy. Unlike Dow Jones reporters, he may have positions in the stocks he writes about. For his past columns, see: www.smartmoney.com/commonsense.

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