US stocks surge on Fannie, Freddie takeoverSeptember 9th, 2008 - 8:41 am ICT by IANS
Washington, Sep 9 (DPA) US stocks soared as investors welcomed the government takeover of beleaguered mortgage giants Fannie Mae and Freddie Mac.The Dow Jones Industrial Average and broader Standard & Poor’s 500 Index both climbed more than two percent, after Asian and European stocks made extensive gains Monday.
Financial and homebuilding shares led the US surge after the Treasury Sunday said it would place Fannie and Freddie in a conservatorship, replacing their chief executives and eliminating share dividends.
The bailout means the government now formally guarantees about half of the US mortgage market, or nearly $6 trillion worth of home loans owned or backed by the two government-chartered lenders, which have struggled to raise enough capital to weather the subprime mortgage crisis.
Investment banks and lenders have suffered more than $500 billion in writedowns of mortgage-related assets over the last year, as plunging housing prices prompted a record number of homeowners to default on their mortgages.
The financial fallout from the housing crisis has limited consumers’ access to new home loans and other types of loans - a key reason for the wider economic slowdown in the US.
The blue-chip Dow climbed 289.78 points, or 2.58 percent, to 11,510.74. The S&P 500 Index was up 25.48 points, or 2.05 percent, to 1,267.79. The technology-heavy Nasdaq Composite Index rose 13.88 points, or 0.62 percent, to 2,269.76.