U.S. stock futures jump on Fannie, Freddie seizure
Posted by: Joshuah in Economics, tags: Fannie Mae, Freddie MacSource: MarketWatch
U.S. stock futures leaped Monday after the government seized mortgage giants Fannie Mae and Freddie Mac, guaranteeing that trillions of dollars in mortgage-backed securities won’t default anytime soon and triggering hopes that banks will resume lending to both customers and each other.S&P 500 futures rose 38.1 points to 1,279.20 and Nasdaq 100 futures rose 41.25 points to 1,811.25. Dow industrial futures climbed 273 points.
U.S. stocks finished last week with steep losses, with the Dow industrials losing 2.8%, the S&P 500 dropping 3.2% and the Nasdaq shedding 4.7% after a string of profit warnings and gloomy economic indicators around the world.
Moves to shed risk came to a halt on Monday as the U.S. government stepped in to run Fannie Mae (FNM), the giant mortgage buyers.
“As house prices, earnings and capital have continued to deteriorate, Fannie and Freddie’s ability to fulfill their mission has deteriorated,” said James Lockhart, the head of Federal Housing Finance Agency which will now oversee Freddie and Fannie.
The two companies will be run by the government indefinitely, with the two current chief executives to be replaced and the government investing up to $100 billion in each firm to keep them solvent. Treasury will receive warrants to purchase common stock of each GSE representing 79.9% of the common stock.
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