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Paulson’s New Plan
September 24th, 2008 categories: Real Estate Finance
What a ride. Mortgage Bonds have been up and down and sideways all week. They are under selling pressure today as the government announced it’s proposed bailout of the financial sector. Over the weekend, Treasury Secretary Henry Paulson announced a plan that would give the Treasury the authority to purchase up to $700 Billion of failed mortgage assets from financial institutions and provide much needed liquidity to the financial markets.
This plan should help restore calm and boost investor confidence. It seems to be working as stocks are rebounding and the Bond market is suffering. Investors around the globe have renewed confidence as evidenced by Japan’s Mitsubishi UFJ Financial Bank announcement to purchase 10 to 20% of Morgan Stanley just days after it was rumored that Morgan Stanley may be one of Wall Street’s next victims.
It will take a while for the increased liquidity to work its way through the financial markets. There may be more failures along the way and the Trading environment for both Stocks and Bonds will likely remain volatile. The Fed’s action to make capital more readily available may have inflationary effects. They have already started issuing more Government Debt in the form of Bonds to raise capital to pay for the $700 billion bailout on the heals of the $200 billion bailout to Fannie and Freddie and the $85 billion bailout to AIG. This may be why we are seeing commodity prices rise, the US Dollar sell under pressure, and the price of Oil quietly climbing almost $20 a barrel.
Hopefully, mortgage rates will settle back down later in the week.
Have a great day!
Lysa Catlin
CMC Finance
858–456–3000
