According to recent reports, the share of consumer lenders and student loan providers experienced significant gains in the stock market following the announcement by government representatives that the US government would provide support and guarantees for $200 billion in consumer loans, including auto loans and student loans.
Among those providers that benefited the most from the announcement, Sallie Mae and First Marblehead Corp saw the highest climbs in share prices. The government’s decision to relieve the strained consumer lending market, which has been left for dead in the worldwide credit crisis, is regarded a good sign by some economists.
Shares for Sallie Mae, which operates under the moniker SLM Corporation, rose 37% and climbed to $10.88. First Marblehead, a Boston-based lender, rose to $1.40, making a 64% increase on the trade floor. Other groups like AmeriCredit Corporation, a subprime auto lender, reached $8.28, a 27% increase. CIT Group rose 26%, with a $3 increase.
The move by the Treasury is widely considered one of its smartest moves to date. The benefits will be immediate and will serve as a salve to heal those companies that suffered serious damages during the credit crunch. Companies such as Sallie Mae have had to struggle in order to organize and sell the loan they had made.
The government’s $200 billion guarantee package will be an effective solution to deal with the aftermath of halt in the securitization markets and help companies stay afloat and level out until the markets turn around.
Every measure enacted by the federal government to provide its ambitious, multi-billion dollar guarantee plan has been a response to larger spikes in the markets and the dramatic drops in share prices among the aforementioned companies. All of this also came in the context of a broader slum in financial stocks caused by concerns regarding the prospect of stronger, potentially longer, recession.
Tags: First Marblehead Corp, Sallie Mae
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