The Fed is actively working to reduce the cost of borrowing by reducing risk premiums with direct purchase of mortgage-backed securities. These direct purchases reducing risk premiums will directly influence mortgage rates from 5.500% last week to a target of 4.500% before long.  New mortgages will drive up earnings across the board.  It will also encourage the reflation of housing with new purchases, which will help homebuilders (the stimulus will also likely include a backdating of tax credits which will help earnings fpr homebuilders also).  Speculation is also out on a housing bill which will directly benefit the new housing season in March. With the buying of MBS from the govt, it will help reprice "distressed" debt to the upside, which will cancel out any further fear of writedowns. The acquisition of Countrywide also delivers tax advantages for the next 2 years, as writedowns and modifications on Countrywide loans are directly written off to the government bearing no risk to the bank.  Why did you think they bought them?