As I noted a couple weeks back, the Federal Reserve will be conjuring money out of thin air to buy "large quantities" (their words) of mortgage-backed securities. The mere anticipation of this flood of freshly-printed cash into the mortgage market has been enough to increase the demand for mortgages and thus lower rates.
Guess who will be managing
Guess who will be managing the actual buying:
http://optionarmageddon.ml-implode.com/2008/12/31/nice-work-if-you-can-get-it/?ref=patrick.net
Mr. Mortgage is theorizing that this is being done in an attempt to stop future wars:
http://mrmortgage.ml-implode.com/
The Bush administration has also put us on the hook for a $249 billion guarantee of Citi assets:
http://globaleconomicanalysis.blogspot.com/2008/11/citigroup-bailout-terms-of-agreement.html
TheBreeze, I agree that there
TheBreeze, I agree that there is pressure from many sources to bail out people who loaned and borrowed with abandon. But your identification of the “Bush administration” as a source of the abandon is disingenuously one-sided.
Barney Frank, Chris Dodd and Chuck Schumer are, along with Bush and the Republican real estate/investment banking cheerleaders, up to their necks in blame for what is happening now. And the borrowers who took money they didn’t intend to repay, or didn’t have the capacity to repay, are to blame along with the mortgage brokers, mortgage bankers, rating agencies, and investors who shoveled money at them without checking they could and would repay. And just because that covers a very large fraction of the US’s population doesn’t make it any less culpable. We don’t excuse war crimes on the basis that “everyone was doing it”, do we?
Just thought I’d remind everyone of the full breadth of blame here. All this argmentation over which participant in the scam is not really to blame is nothing more than positioning to get the rest of us to accept a bailout for those participants.
On Rich’s post, I would say that the more the US govt props up sectors of our economy that depend on bloated asset prices, through money creation and interest rate suppression, the more unsupported the dollar becomes. It’s already lost a lot of value against the yen, and it may lose significantly more if these govt policies continue.
Rich,
From what you know of
Rich,
From what you know of the bond market, were the mortgage rates forced down by the earlier Fed announcement, or does the market wait until the purchases actually begin?
Thanks,
Eric
The best (or worse part
The best (or worse part depending on where you are coming from) is a fact that a lot of people may have missed…PIMCO put Greenspan on their payroll after he left the Fed…yep!