But the truth is that nobody knows. Fannie and Freddie have financed several hundred billion dollars of doubtful mortgage paper that may or may not pay off enough to meet their debts, and they cannot predict whether they will have gains or losses from their gigantic exposures in the derivatives markets.

If the government had not guaranteed the full payments of principal and interest on their paper, the foreign governments that own so much of it might have had to show losses on their dollar-denominated accounts. To say the least, this would make them reluctant to continue to finance our trade deficit, our wars and the strength (such as it is) of our dollar. Our interest rates, and not just for mortgages, would soar.

So the debate about whether dishonest lenders and dumb borrowers should have been bailed out was really meaningless  the conclusion was foregone. The international position of the dollar had to be defended against even the hint of possible failure at Fannie and Freddie; they had to be saved at all costs.

This brings us to the Exchange Stabilization Fund, which could give the government the means to save Fannie and Freddie without ignoring the Constitution. The fund was started in 1934 as a place to set aside the profits credited to the government when President Franklin Roosevelt took possession of the nation’s monetary gold. It’s been used sparingly ever since, perhaps most notably when Treasury Secretary Robert Rubin used it to extend a $20 billion line of credit to Mexico in 1995.

The net wealth of the fund, most of which can be realized with the stroke of a pen, is about $41 billion. Among the uses specified when it was created was maintaining “orderly exchange arrangements and an orderly system of exchange rates.” Nothing could be more disruptive of orderly exchange arrangements than even the hint of a default at Fannie and Freddie.

Just because Congress has given Mr. Paulson a blank check to dip into the Treasury doesn’t mean he has to do it. Among the advantages of using the stabilization fund is that it comes with built-in Congressional oversight  a mandatory monthly review by Congress was written into the law in 1978. Should conditions worsen at Fannie and Freddie, Congress would have an early warning system.

We should all hope that Fannie Mae and Freddie Mac escape this jam on their own. Should they falter, however, it’s only sensible for the Treasury and Congress to have a plan to step in. But the bailout bill that President Bush is expected to sign this week will give Secretary Paulson untested and unconstitutional powers. Why take that leap when there are proved alternatives like the Exchange Stabilization Fund?