There might not have been any viable alternative to last weekend's announcement of a government takeover of mortgage giants Fannie Mae and Freddie Mac, but the public should expect — and demand — that reward-for-failure not be part of the package. That means that high-level managers should pay a financial price for their failed leadership.

Reports that the departing chief executive officers of the two government-sponsored agencies are slated to each receive severance packages worth $10 million to $15 million illustrates a troubling example of capitalism gains and socialism losses.

Fannie Mae and Freddie Mac made lots of money for management and shareholders when times were good. And their top executives took home multimillion-dollar rewards during those good times. Now that the companies are so burdened by questionable mortgages that the federal government had to step forward to take control to calm jittery financial markets, the executives who brought the companies to the brink will suffer little hardship — while U.S. taxpayers have a potential exposure of billions of dollars.

Stabilizing the U.S. and global financial markets is the main justification for what's being called a government conservatorship of Fannie Mae and Freddie Mac. Supporters of the bailout also argue that the agencies, which hold or guarantee about 50 percent of the $12 trillion U.S. mortgage market, are "too big to fail."

In this case, and at this time, that might be true. But for capitalism to work — for free market forces of risk and reward to function properly — something large should be allowed to fail. The bailout of Bear Stearns earlier this year and now Fannie Mae and Freddie Mac looks like a troubling trend of government bailouts of big, private companies.

To fund more bailouts with government/taxpayer money would lead to more trouble, more corporate risk- taking based on the assumption of government help when things go bad.

It's increasingly clear that without the prospect of painful financial losses and other consequences of failure, there is nothing to temper extreme risk-taking tendencies in business.

Why should management mistakes or failed risk-taking in big business be rewarded with government help when small business mistakes lead to bankruptcy and dissolution?

The arrangement with Fannie Mae and Freddie Mac is another example of "heads we win, tails you lose." Top managers take big salaries and bonuses when times are good or bad, but small shareholders and taxpayers get stuck when things go bad.

Fannie Mae and Freddie Mac have operated as unusual hybrid entities — private companies backed by the federal government. Their government backing gave them significant advantages over competitors in the private sector. And they used their clout with the government to retain or expand their competitive advantages.They also used lobbyists and their coziness with Congress to resist and fend off efforts at increased government oversight, which might have steered the companies clear of the riskier mortgages that have led to the bailout.

Former Fannie Mae CEO Franklin Raines made headlines a few years ago when it was reported that he was paid $52 million in compensation from 1999 to 2004. This was all the more outrageous when it was discovered that accounting irregularities at Fannie Mae had inflated earnings (and Raines' pay), and the company had to restate earnings for those years.

Despite the gold-plated deals for departing executives, the government takeover of Fannie Mae and Freddie Mac has created losers along the few winners. The biggest losers are shareholders. And as investors in a private company, that's as it should be. But, corporate bosses should share more of the pain with the investors, which include many mutual funds and commercial banks.

In the coming months, Congress will debate the future of Fannie Mae and Freddie Mac. Some argue they should be privatized, while others support continued government backing to encourage more home ownership. Yet another option is to operate the companies as public utilities supplying financing for housing.

Treasury Secretary Henry Paulson has hinted that he wants to see a change in the business model that allowed Fannie Mae and Freddie Mac to prosper for many years — but to now require a government bailout.

Whatever changes are made, the prior status of having private profit and public risk must not continue.