On this day in economic and business history...

The Federal Housing Finance Agency placed Fannie Mae (FNMA 1.47%) and Freddie Mac (FMCC 3.41%) into conservatorship on Sept. 6, 2008. The reeling government-sponsored enterprises, or GSEs, backing about $5.4 trillion in combined housing debt, thus returned to the hands of the government for the first time in four decades. This drastic action, made public by Treasury Secretary Henry Paulson and FHFA director James Lockhart, promised the two GSEs up to $200 billion in federal financial support to stem a tide of losses that had already reached $15 billion at a relatively early stage in the global financial crisis.

In exchange for these funds, the government received $1 billion each of Fannie and Freddie's preferred shares, gained the promise of quarterly dividend payments, and also took possession of 80% of each GSE. By this point, shares of the two companies had already fallen about 90% from their pre-crisis peaks. Major investors were actually looking forward to such an action -- PIMCO's Bill Gross, one of the world's leading bond investors, called it "a significant step and almost exactly what we had hoped for" when questioned by CNNMoney.

At this point, the Dow Jones Industrial Average (^DJI 0.69%) had only fallen 20% below its 2007 peak, which typically marks the difference between a "correction" and a full-on bear market. However, when markets reopened (Paulson and Lockhart's announcement was made on a Sunday, the day after conservatorship officially began), investors appeared optimistic about conservatorship, and the Dow rose 2.6%. This enthusiasm, however, did not last. The six months following conservatorship saw the Dow fall another 41%, and by the time the crash was over, the Dow had lost more than half of its value for only the second time in its history.

Did conservatorship fail? It's hard to make that argument considering that the two GSEs had, after five years under government control, already paid $146 billion in dividends. That's all but 22% of the $187.5 billion that had been spent on their bailout, and the government is quickly approaching the breakeven point on its disbursements. This doesn't mean the GSEs will return to private ownership when the debt is repaid, as the government can effectively maintain control until it decides what to do with the two companies.

The GSE bailout has thus far been a fairly good investment for the government, but it simply wasn't enough to stop the subprime landslide, as it could only divert a few of the first rocks rolling down the mountain.

Unlocking the secrets of life
The first genetically engineered drug -- a biosynthetic insulin produced by modified bacteria -- was announced to the world at a press conference in a suburban Los Angeles hospital on Sept. 6, 1978. The development of synthetic insulin continued decades of work that began with a team working for Eli Lilly (LLY 1.96%). Lilly again took a leading role in the next great leap forward in diabetes treatments by signing an agreement to mass-produce and distribute the new synthetic formulation.

Researchers at the conference attempted to tamp down sky-high expectations by cautioning that it might take up to five years for the new insulin to pass all of its requisite clinical trials. Still, their excitement was palpable -- The Los Angeles Times quoted veteran medical researcher Dr. Rachmiel Levine as saying that "in a short time, the large-scale production of native [human] insulin will be possible." Levine also stated that costs ought to come down once industrial-scale production began, and expressed a belief that it would enable drugmakers to cope with the growth of diabetic populations, which were already outpacing base population growth.

The Times also described the new techniques that made synthetic insulin possible:

The scientists used the new biological technique known to science as "recombinant DNA technology" and to the public as "genetic engineering" or "gene splicing."

It was through this technique that the scientists were then able to slip their man-made genes into the bacteria. These genes are the blueprints for the two major parts of insulin. The bacteria were then encouraged to make large numbers of those parts.

Later, using chemical techniques, they extracted these segments from the bacteria and assembled them in a test tube to make the complex molecule that is insulin. ... The chemical synthesis of the genes for the two chains was begun last September and completed by March, 1978. Approximately 1,000 different chemical steps were involved in the process.

This synthetic insulin was first sold to the public as Humulin in 1982. Today, many drugs are produced by genetically engineered microorganisms, and the field has since moved on to direct gene therapy, by which defective human genes are replaced or otherwise repaired. In fact, many of the world's best-selling drugs are produced using similar processes as those that produced Humulin. Eight of the top 20 best-selling drugs in 2012 were "biologics," as they're commonly called. Roche is responsible, or partly responsible, for three (Avastin, Herceptin, and Rituxin), worth a combined $20 billion in revenue, and Amgen produces Neulasta and Enbrel, worth a combined $12 billion in revenue. The top three best-selling drugs in the world were all biologics in 2012, led by AbbVie's (ABBV 0.98%) rheumatoid arthritis drug Humira, which posted $9.3 billion in sales.