Fannie's Daniel Mudd and Freddie's Richard Syron could have received, in total, up to $25 million, an amount that had come under heavy criticism as the government took over the financially battered mortgage giants. That takeover, which occurred a week ago Sunday, thrusts trillions of dollars of risk directly onto taxpayers' shoulders.

Freddie Mac and Fannie Mae combined own or guarantee $5.4 trillion in outstanding mortgage debt. Although they do not directly make mortgage loans, they buy mortgages from banks and other lenders, then repackage them into securities to sell to investors. That makes more money available to lend to home buyers.

However, as the collapse of the housing market and subprime mortgage crisis led to more mortgage delinquencies and foreclosures, those securities became riskier, making them more difficult to sell.

Lack of confidence meant that to build capital, Fannie Mae and Freddie Mac had to pay more for borrowing in the bond market and had to tighten credit standards. The takeover is intended to boost confidence in the two companies. They could then find it easier to get funding, which could lead to lower mortgage interest rates. That could spur buyers and help rejuvenate the housing market.

At Fannie Mae, Herbert Allison, former CEO at mutual fund company TIAA-CREF, replaces Mudd. At Freddie Mac, David Moffett, who was vice chairman of U.S. Bancorp, replaces Syron. Syron and Mudd will remain as consultants for an undetermined time.

Last Sunday Treasury Secretary Henry Paulson and James Lockhart, director of the newly formed Federal Housing Finance Agency (FHFA), announced that Fannie Mae (FNM), based in Washington, D.C., and Freddie Mac (FRE), based in McLean, Va., would begin operating immediately under a federal government conservatorship. Unlike a receivership, the arrangement leaves hope for shareholders that investments may regain some value. President Bush signed housing legislation in July that gives the government clear authority to intervene as it has.

Freddie and Fannie were chartered by the government in an effort to help stabilize the mortgage market by buying loans from lenders. Fannie Mae was first established in 1938, during the Great Depression, and Freddie followed in the 1970s.