Fannie, Freddie Stock Prices Soar On Announcement Of Government's Blank Check Support

Call it a Christmas gift for the mortgage giants.

Shares of Fannie Mae and Freddie Mac were up big yesterday on the Treasury Department's Christmas Eve announcement that it would issue blank check support to the troubled lenders. Fannie Mae shares were up 21 percent and shares of Freddie Mac rose 27 percent during yesterday's trading. (In early trading this morning, Fannie Mae shares were up 7.87 percent; Freddie Mac shares were up 5 percent.)

The Treasury Department removed a $400 billion cap on its support for the two lenders, which signaled to investors that the beleaguered companies will continue to be used to prop up the housing market well into next year.

Though neither lender was close to topping the $200 billion cap on government support, Treasury's announcement likely signals that the lenders will continue to provide a massive crutch to the housing market. Here's MarketWatch, drawing on a recent note to investors from Bose George, an analyst at Keefe, Bruyette & Woods:

The government may put a mortgage-modification effort, called the Home Affordable Modification Program, or HAMP, into overdrive in coming years, pushing for reductions in the principal outstanding on home loans overseen by Fannie and Freddie, Bose George, an analyst at Keefe, Bruyette & Woods, wrote in a note to investors Monday.

Though it's certainly worrisome that the two enormous, bailed-out -- and unreformed -- institutions will seemingly be central to the Obama administration's effort to stabilize the housing market, George issued a word of caution on the recent run-up in Fannie-Freddie shares. CNNMoney passes along this nugget: "The shares have no long term value," he wrote. "This reinforces our view that the common shares will eventually trade to zero."

At the LA Times, Tom Petruno talks to bank analyst Bert Ely, who is similarly negative on the value nature of Fannie and Freddie's shares. Investors in the two lenders "won't get anything back" long-term, says Ely. Here's more: "Ely points out another reason to doubt that the stocks have any real value: The pay packages the Treasury announced Thursday for the companies’ chief executives consisted exclusively of cash compensation; no shares were offered. "

Get HuffPost Business On Facebook and Twitter!