Investors grab Fannie, Freddie after House vote

NEW YORK – Investors snapped up shares of mortgage finance giants Fannie Mae and Freddie Mac before Wall Street opened yesterday, a day after the US House of Representatives passed a massive rescue package to shore up the struggling housing market.

The bill would allow the government to extend an emergency lifeline to the two companies, which own or guarantee nearly half of the US$12 trillion in outstanding US mortgage debt. The US Senate has yet to vote on the package, but President George W Bush dropped an earlier threat to veto the bill, paving the way for investors to snap up Fannie and Freddie shares.Before the opening bell yesterday, Fannie shares rose 6,7 per cent to US$16, up from Wednesday’s closing level of US$15.Freddie shares rose about 5,1 per cent to US$11.35 from US$10.80 a day ago.”As far as taking risk in Fannie and Freddie, with this bill, clearly there is more confidence in the two companies,” said Michael Cheah, portfolio manager at AIG SunAmerica Asset Management in Jersey City, New Jersey.”But the big picture is that home prices are still going to drop more, even from here.”A White House spokeswoman said on Wednesday that Bush, who had threatened to veto the measure, would sign the bill because it is needed urgently to address a housing and credit crisis that some economists say is the worst since the Great Depression.The plan would allow the Treasury to raise its line of credit for Fannie Mae and Freddie Mac and buy equity in them if necessary.The bill would also set a new regulator for the government-sponsored enterprises and raise the size of mortgage loans they could guarantee.New York Federal Reserve President Timothy Geithner yesterday in prepared congressional testimony obtained by Reuters, said substantial reforms to financial system regulation were needed.Geithner was to testify before Congress yesterday along with Securities and Exchange Commission Chairman Christopher Cox.Nampa-ReutersThe US Senate has yet to vote on the package, but President George W Bush dropped an earlier threat to veto the bill, paving the way for investors to snap up Fannie and Freddie shares.Before the opening bell yesterday, Fannie shares rose 6,7 per cent to US$16, up from Wednesday’s closing level of US$15.Freddie shares rose about 5,1 per cent to US$11.35 from US$10.80 a day ago.”As far as taking risk in Fannie and Freddie, with this bill, clearly there is more confidence in the two companies,” said Michael Cheah, portfolio manager at AIG SunAmerica Asset Management in Jersey City, New Jersey.”But the big picture is that home prices are still going to drop more, even from here.”A White House spokeswoman said on Wednesday that Bush, who had threatened to veto the measure, would sign the bill because it is needed urgently to address a housing and credit crisis that some economists say is the worst since the Great Depression.The plan would allow the Treasury to raise its line of credit for Fannie Mae and Freddie Mac and buy equity in them if necessary.The bill would also set a new regulator for the government-sponsored enterprises and raise the size of mortgage loans they could guarantee.New York Federal Reserve President Timothy Geithner yesterday in prepared congressional testimony obtained by Reuters, said substantial reforms to financial system regulation were needed.Geithner was to testify before Congress yesterday along with Securities and Exchange Commission Chairman Christopher Cox.Nampa-Reuters