Fannie and Freddie likely to merge, but as public or private entity?

When Fannie Mae and Freddie Mac were seized by the government in September, most people assumed that these government supported entities (GSE) were likely to change dramatically. Now that heads of both GSEs are out or likely leaving -- Freddie CEO David Moffett quit in March and Fannie's CEO Herb Allison is the leading candidate to run the $700 billion U.S. bank rescue program -- leadership at the top is no longer an issue for making significant changes.

Rumors reported by Bloomberg indicate that executives at Fannie Mae, which is much larger than Freddie Mac, have started internal discussions about taking over Freddie's operations. That would certainly save overlapping costs and reduce administrative expenses.