CSBJ Daily

The Associated Press

Scrambling to bolster eroding investor confidence, the Federal Reserve and the Treasury Department announced steps to brace slumping mortgage giants Fannie Mae and Freddie Mac.

The companies’ shares, which have plunged as losses from their mortgage holdings threatened their financial survival, opened higher Monday. Fannie Mae rose 27 cents to $10.53, while Freddie Mac climbed 34 cents to $8.08.

The plan, unveiled Sunday, is intended to signal the government is prepared to take all necessary steps to prevent the credit market troubles that erupted last year with losses from subprime mortgages from engulfing financial markets.

The Fed said it granted the Federal Reserve Bank of New York authority to lend to the two companies “should such lending prove necessary.” They would pay 2.25 percent for any borrowed funds – the same rate given to commercial banks and big Wall Street firms.

The Fed said this should help the companies’ ability to “promote the availability of home mortgage credit during a period of stress in financial markets.”