Financial stocks soared again on Wednesday, jumping after the Federal Reserve said it could pour more than $1 trillion into mortgage lending and the housing market.

The Fed said it will buy up to $750 billion more of agency mortgage-backed securities, such as those issued by Fannie Mae ( FNM) and Freddie Mac ( FRE) and double its acquisitions of agency debt in 2009, which would take the total as high as $200 billion. The policy-making Federal Open Markets Committee also will buy up to $300 billion of longer-term Treasury securities over the next six months.

The NYSE Financial Sector Index jumped after the announcement, closing the day up 6.3% to 2,934.36

Citigroup ( C) led the way, rallying 22.7% to $3.08, while Bank of America ( BAC) added $1.40 to $7.67.

JPMorgan Chase ( JPM) climbed 7.8% or $1.97 to $27.11 and Wells Fargo ( WFC) jumped 17.5% to $27.11.

Battered insurance giant AIG ( AIG) also jumped 43.8% or 42 cents to $1.38, even as CEO Edward Liddy was being grilled by lawmakers on Capitol Hill over the controversial retention bonuses paid to top executives. AIG has received more than $170 billion in federal bailout money, more than any other company in the financial crisis.
This article was written by a staff member of TheStreet.com.

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