The recent announcement of removing Fannie Mae and Freddie Mac from S&P 500 stock index came just days after the U.S. government took over the two huge financial institutions. According to staff writers of Washington Post, the federal government will now ensure the companies have the capital to continue funding mortgages and --as important to the markets-- will guarantee repayment of the bonds and other forms of debt issued by them.
U.S. Treasury Secretary Henry M. Paulson Jr. has confidence in their plan of placing Fannie and Freddie into a government-managed conservatorship. As U.S. stocks surged high, investors has also expressed confidence in the government’s support in the housing and mortgage markets.