The Treasury Department is "not talking about nationalizing" Fannie Mae and Freddie Mac, the WSJ is posting, quoting an unnamed source. Earlier today, Treasury Secretary Henry Paulson issued a statement saying that the Bush administration's "primary focus is supporting Fannie Mae and Freddie Mac in their current form." That would appear to discount a report in the NYT that the government was considering a takeover of the mortgage giants. Meanwhile, shares of Freddie and Fannie have recovered somewhat after an early morning plunge. But that's not saying much (Freddie is down around 35 percent and Fannie is down around 30 percent).

Bill Gross, chief investment officer of Pacific Investment Management Co., the large Newport Beach, Calif., bond manager known as Pimco, said the firm bought a large amount of Fannie Mae debt Thursday. A default would set off "a firestorm of intolerable proportions," Mr. Gross said.

If you really want to be nervous, look who is offering reassurance. From the NYT story:

President Bush, after meeting with his team of economic advisers Friday morning, said he was briefed on the situation by Treasury Secretary Henry M. Paulson Jr. “He assured me that he and Ben Bernanke will be working this issue very hard,” Mr. Bush told reporters after the meeting.