U.S. stock markets surged higher this morning as investors expressed confidence that the government's weekend seizure of Fannie Mae and Freddie Mac would bolster the slumping U.S. housing and mortgage markets.

Shares in the companies themselves, meanwhile, plummeted towards penny stock range, undermined by a government takeover that puts the rights of bondholders and the U.S. Treasury above those of common and preferred stockholders. Shares in both companies each fell by about 80 percent, with Freddie at one point falling below a dollar before rebounding to about $1.50.

Following rallies that pushed Asian and European indexes up as much as 4.5 percent, the Dow Jones industrial average  jumped more than 330 points in early trading before falling back to a roughly 200-point gain, a jump of about 2 percent. The Nasdaq and S&P 500 were up by more than 2 percent each.

The rally provided at least an initial vote of confidence in the plan announced yesterday by Treasury Secretary Henry M. Paulson, Jr., to place the two mortgage giants into a government-managed conservatorship while a longer-term restructuring is ironed out. Central bankers in Beijing and Tokyo - important buyers of U.S. mortgage-backed debt - also came out in support of the takeover, which includes U.S. government guarantees that their billions of dollars in bonds will be repaid.

In an interview on CNBC this morning, Paulson said seizing control of the two companies was "not something I wanted to do" but was unavoidable given the havoc the failure of either firm would have caused to the U.S. and global economies. Fannie and Freddie are critical to the functioning of U.S. mortgage markets, but there have been growing doubts about their ability to fill that role.