The news that U.S. Treasury Secretary Henry Paulson will seek the Congress’ support to shore up the mortgage finance companies by buying equity stakes and increasing lines of credit, pushed European shares higher on Monday and boosted the dollar which was nearing its all-time record low against the euro.

Fannie Mae rose 14.3 percent in Frankfurt while Freddie Mac advanced 12.6 percent after Paulson promised to seek authority to buy unlimited amounts of equity and the Federal Reserve said it will lend the two major companies to help provide interim financing.

Concerns that Fannie Mae (Federal National Mortgage Association) and Freddie Mac (Federal Home Loan Mortgage Corporation), United States’ main providers of home loans, may collapse grew last week putting pressure on the Treasury, Federal Reserve and White House officials to come up with a plan to salvage the two giants in the case they were unable to fund themselves. Fannie Mae and Freddie Mac are of a paramount importance for the U.S. mortgage industry, accounting for almost 50% of the $12 trillion market.

However, Fannie Mae climbed $1.47 to the equivalent of $11.72 at 11 a.m. in Frankfurt trading, while Freddie Mac rose 98 cents to $8.73.

Should the government decide the only solution would be to take over the two government-sponsored enterprises (GSE) the measure would make the common stock of each company worthless.

Officials plan to implement measures that would calm investors after the big shocks during which both companies fell more than 40% last week. The two GSE own or guarantee $5 trillion of debt, close to half the value of all U.S. mortgages.

"The ramifications of all this seem to suggest that the U.S. realized they cannot tolerate further pressure on the U.S. housing sector," said Nomura rate strategist Charles Diebel according to Reuters.