Asian stocks rise as Fannie Mae and Freddie Mac get bailed out

Financial institutions, stock markets and governments across Asia have applauded the U.S. government takeover of Fannie Mae and Freddie Mac, a move that came after several central banks in the region expressed growing alarm over the future of their vast investments in the two ailing mortgage lenders.

Japan, South Korea and China were the worst hit Asian economies when the real estate mortgage lending firms declared their losses earlier this summer. The Washington Post said Asian investors, led by central and commercial banks in China, Japan and South Korea, are among the largest holders of Fannie Mae’s and Freddie Mac’s mortgage-related debt, the value of which has now effectively been guaranteed by the U.S. government.

The takeover sent markets from Taipei to Tokyo jumping on Monday and calmed what had been growing concerns of investor flight in South Korea. The key stock index in Tokyo jumped 3.4 percent on Monday. Hong Kong’s jumped 4.3 percent, Seoul’s 5.2 percent, and Taiwan’s 5.6 percent.

In the last few months, governments and central bank chiefs in all three countries had held talks with the U.S. Government expressing their concern at the deep losses Fannie Mae’s and Freddie Mac had declared. The Asian governments also offered advice on ways to bail out the American real estate market.

Asian banks, particularly in China, had begun curbing new purchases of Fannie Mae and Freddie Mac holdings and divesting themselves of those they already had. Investors generally had been insisting on higher interest rates — driving up the companies’ operating costs and pushing mortgage rates higher. U.S. officials hope the takeover plan will reverse that trend.