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Markets embrace Fannie, Freddie takeover

Bank stocks jumped this morning as investors embraced the federal government's takeover of Fannie Mae and Freddie Mac as a step toward stabilizing the floundering mortgage market.

Among Charlotte's big banks, Bank of America Corp. shares were up 6 percent to $34.19 in early morning trading, while Wachovia Corp. shares rose more than 9 percent to $18.34.

On Sunday, the chief executives of both banks issued statements praising the action by top banking regulators.

"This action should lead to an increased availability of mortgage financing, which will help achieve stability in housing, a critical element in the health of our economy," Bank of America chief executive Lewis said.

He pledged to support policy makers and "keep mortgage money flowing." Bank of America became the nation's biggest mortgage lender in July when it bought Countrywide Financial Corp.

Wachovia CEO Bob Steel, a former U.S. Treasury Department official, said the agency had developed a "very constructive plan that should be encouraging to the financial markets, restore confidence to the housing industry while being sensitive to taxpayers."

Banks sell mortgages to Fannie and Freddie and are holders of the companies' preferred shares. "Investors are increasingly concerned that the preferred stockholders at (Fannie and Freddie) could suffer partial or complete elimination of their interests," analysts at investment bank Keefe Bruyette and Woods wrote in a report last month.

The report said large banks have little exposure to the shares, while some regional banks have "significant exposure." The report listed Bank of America and Winston-Salem-based BB&T Corp. as institutions with no exposure. It did not mention Wachovia. Bank of America and Wachovia declined to comment on their exposure.

Federal banking regulators on Sunday said they had been assessing the exposure of banks and thrifts to Freddie and Fannie.

"The agencies believe that, while many institutions hold common or preferred shares of these two government-sponsored enterprises, a limited number of smaller institutions have holdings that are significant compared to their capital," the regulators said in a statement.

The Federal Reserve Board, the Federal Deposit Insurance Corp., the Office of the Comptroller of the Currency, and the Office of Thrift Supervision said they plan to work with institutions as necessary to help them restore "capital-restoration plans."

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