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U.S. bank takeovers boost global markets

Sept. 8, 2008 at 8:19 AM   |   Comments

WASHINGTON, Sept. 8 (UPI) -- The announced U.S. takeover of two mortgage giants sent stock indexes in Asia and Europe higher Monday.

Sunday's news that the Federal Housing Finance Agency would take control of the Federal Home Loan Mortgage Corp. and the Federal National Mortgage Association pushed stock indexes into positive ground in Tokyo, Frankfurt and London, The New York Times reported.

Asian banks have huge investments in U.S. mortgage-backed securities. The People Bank of China holds an estimated $340 billion in Freddie Mac and Fannie Mae securities.

"The fact that they (the U.S. government) will be able to buy mortgage-backed securities from other banks is really important," William de Vijlder, chief investment officer at Fortis Investment Management in Brussels told the Times.

The rescue "goes a long way to stopping this housing deflation," said Bill Gross, the co-chief investment officer of bond investment firm Pimco.

While the move has bumped investor confidence in the near term, analysts said long-term issues -- measured, in part, by the unemployment rate hitting a five-year high at 6.1 percent in August -- remain on the table.

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