Fannie and Freddie shares leap amid financial rally

By Kristina Cooke

NEW YORK (Reuters) - Fannie Mae and Freddie Mac shares had their best day in more than two decades on Wednesday after Wells Fargo's strong earnings spread relief across Wall Street, even as a plan to prop up the two mortgage finance titans met resistance from congressional Republicans.

The two pillars of the U.S. housing market also benefited from remarks by Federal Reserve Chairman Ben Bernanke that they are "in no danger of failing."

Nevertheless, the Bush administration scrambled to win support for the measures to bolster Fannie and Freddie as some Republican lawmakers objected to attaching the plan to a major housing market rescue bill.

Treasury Secretary Henry Paulson met on Wednesday evening with lawmakers from both parties and emerged sounding upbeat about his prospects. "I feel very confident and optimistic that there is broad-based support for moving quickly in getting GSE reform done ... some time next week," he told reporters.

Winning fast approval is seen as key to preventing an already-weak housing market from deteriorating further and tipping the U.S. economy into recession.

The U.S. Treasury and Federal Reserve's plan to support the two government-sponsored enterprises includes a pledge to extend more credit or buy equity stakes in Fannie Mae and Freddie Mac if needed.

On Wall Street, meanwhile, shares of both Fannie Mae and Freddie Mac jumped by about 30 percent each on Wednesday. It was Freddie's biggest one-day percentage gain since 1988, and Fannie's best day since at least 1981.

The rally had less to do with the rescue plan than with investor relief about quarterly earnings at Wells Fargo. The nation's fifth-largest bank and second-largest mortgage lender posted a profit that topped analysts' expectations and Wells Fargo also raised its dividend.