WASHINGTON — The widening housing crisis took center stage on the presidential campaign trail yesterday after the Treasury Department confirmed to the candidates it was preparing a historic seizure of mortgage finance giants Fannie Mae and Freddie Mac.

Speaking in Terre Haute, Ind., Democrat Barack Obama welcomed the move by Treasury, saying the two entities had sought profits over the stability of their own companies, which are vital to U.S. mortgage lending.

"The management was not making decisions that were designed to help them meet what should have been the mission," he said. "They were boosting profits as a priority — with the management bonuses that came with those priorities."

Treasury Secretary Henry Paulson briefed Obama late Friday on plans to seize, perhaps as early as this weekend, Fannie Mae and Freddie Mac in an effort to bolster the pair and calm jittery global financial markets.

Paulson told Republican John McCain that Fannie and Freddie — which purchase mortgages from banks and package them into popular bonds sold to investors — would be seized and placed under temporary control in one of the largest government bailouts ever. The move is expected before Asian markets open Monday, which is tonight on the U.S. East Coast.

McCain yesterday called for the eventual elimination of Fannie and Freddie, complaining they have become so large and poorly managed that they pose a risk to the broader financial markets.

McCain promised to get "real regulation that limits their ability to borrow, shrinks their size until they are no longer a threat to our economy, and privatizes and eliminates their links to the government."

Obama, too, has been critical, complaining that Fannie and Freddie should either operate as public entities without profit, or as private companies that won't be rescued if they fall into trouble.

As explained to the campaigns, Fannie and Freddie would be placed under the control of their regulator, the new Federal Housing Finance Agency. This agency was created when President Bush signed legislation on July 30 that did away with the prior regulator of Fannie and Freddie, the Office of Federal Housing Enterprise Oversight.

The new agency has greater powers and the authority to manage the two entities if they are placed under government control. Treasury hopes the action will stabilize credit markets, give banks incentive to do more mortgage lending and bring down mortgage rates by reducing the gap between mortgage rates and longer-term Treasury bonds.

"It should bring mortgage rates down, because Fannie and Freddie are now (after the takeover) like Treasury debt," said Mark Zandi, chief economist for forecaster Moody's Economy.com.

Rates on a 30-year fixed mortgage could come down to between 5.25 percent and 5.5 percent, he said, and world financial markets should respond favorably tomorrow.