Freddie and Fannie give new hope to equities?

CNN Money brings you the Freddie and Fannie bailout.

NEW YORK (CNNMoney.com) -- Federal officials on Sunday unveiled an extraordinary takeover of Fannie Mae and Freddie Mac, putting the government in charge of the twin mortgage giants and the $5 trillion in home loans they back.

The move, which extends as much as $200 billion in Treasury support to the two companies, marks Washington's most dramatic attempt yet to shore up the nation's housing market, which is suffering from record foreclosures and falling prices.

The sweeping plan, announced by Treasury Secretary Henry Paulson and James Lockhart, director of the Federal Housing Finance Agency, places the two companies into a "conservatorship" to be overseen by the Federal Housing Finance Agency. Under conservatorship, the government would temporarily run Fannie and Freddie until they are on stronger footing.

"A failure [of Fannie and Freddie] would affect the ability of Americans to get home loans, auto loans and other consumer credit and business finance," Paulson said at a press conference in Washington. "And a failure would be harmful to economic growth and job creation."

Asian stock markets started the week with a bang but KLSE was a bit less impressive. Does the markets have more legs to run -- or -- just "hangat hangat tahi ayam" rally?

KBW Bank Index has been recovering since July 2008. KBW Bank sector is a capitalization-weighted index composed of 24 geographically diverse stocks representing national money center banks and leading regional institutions.



The market perhaps already anticipated both of these giants will be nationalized by judging on the price action two months ago. Bill Gross of Pimco has been calling the bluff on Paulson two months ago.

Is this a market event or an economic event? If this is a market event, then confidence recovery - lending to each other again - will lead to loan growth and spurs growth. If this is an economic event, then we need a bit longer for recovery for people to price growth in the stock price.



S & P 500 is still expensive(market goes down but PE goes up not a good sign) and it will be difficult to have an overall rally. However, stable market will give chance to oversold stocks to recover.