Morgan Stanley was the low bidder in the Treasury's auction to find a top Wall Street adviser on GSE-related issues. It ended up making a stunning discovery: Freddie Mac's capital position was worse than initially thought, reports the New York Times. The GSE made decisions that were legal, but also ended up overstating its capital situation. That pushed the Treasury to conclude that more than a one-time capital infusion would be required. The decision to put Fannie and Freddie into conservatorship is as necessary as it is shocking. But something had to be done. Top executives of both companies will be pushed out. But they may have a bit more to answer to as people seek to understand all this.

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