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Tag: TARP (page 1 of 1)

February 9, 2009

What are the Stimulus Plan and TARP II going to mean for the housing and mortgage markets?

by

Mortgage Officer

Author website

While I could write for a LONG time about it, I’m going to limit it to what I feel are the top 6 things that I think could very well happen.   Keep in mind, this is being written after watching President Obama’s press conference but before anything gets passed.

1. The market is expecting that both the Stimulus Plan and TARP II will provide “the answer” to the problems that are currently plaguing our economy.   With that being said, I believe the markets will be disappointed because the problems facing the economy are way more complex and urgent than what one or two bills can solve.   The disappointment will put downward pressure on stocks and upward pressure on rates.

2. The $15,000 tax credit for home buyers will pass but rather than jumpstarting the housing market, it will instead cause a few people to buy homes, mainly first time home buyers, and will extend the inventory problems that we have because prices won’t adjust as they should.   We won’t get nearly the “bang” for the $Billions that will be spent on the tax credits.   I’m sorry but I really think the main beneficiaries of the $15K tax credit will be mortgage lenders, real estate people and the relatively few people who were already thinking of buying.   Will it reduce inventories?  No, other than taking some bank owned inventory (for first time buyers) off the banks, the rest of the people will be “shuffling” inventory because they all have a house to sell.

3. Between the Stimulus Plan and the TARP II funds, we’ll (yes, it’s you and me) will be spending close to $1.2 Trillion.   Do we have the money?   No, we don’t, so we’re going to borrow it.   What will that mean to the market?   A couple of things are going to happen (obviously in my opinion):  1) The government is going to flood the market with debt in order to finance this spending.   That’s going to push the supply demand equilibruim off base and that is going to put upward pressure on mortgage rates.

4. What about that 4.5% mortgage rate?  Is it Read more

November 12, 2008

Paulson Translated

by

Mortgage Officer

Author website

After listening to and reading the text from Paulson’s speech this morning, I had to sit down and translate it because there was so much he wasn’t saying and so much that he was saying that was just not “right.”   I hope that you’ll do two things:

  1. Take the time to read the entire thing.
  2. Make your opinions known – tell me if you think I’m all wet.  Talk to others about it, write your local paper, forward a copy of this to others, call your congressman.   Don’t just sit back and say, “I don’t like it.”

Here goes:

Paulson Translated – His original speech is in “normal” type, my comments are in bold.

Washington, DC — Good morning. I will provide an update on the state of the financial system, our economy, and our strategy for continued implementation of the financial rescue package. Keep in mind that this strategy is subject to change by tonight.

Current State of Global Financial System

The actions taken by Treasury, the Federal Reserve and the FDIC in October have clearly helped stabilize our financial system. Before we acted, we were at a tipping point. Credit markets were largely frozen, denying financial institutions, businesses and consumers access to vital funding and credit. He uses past tense verbs, but I’m not sure that isn’t still true. U.S. and European financial institutions were under extreme pressure, and investor confidence in our system was dangerously low.

We also acted quickly and in coordination with colleagues We told them who we were going to buy and we all slashed rates together around the world to stabilize the global financial system. Going into the Annual IMF/World Bank meetings in early October, I made clear that we would use the financial rescue package granted by Congress to purchase equity directly from financial institutions – the fastest and most productive means of using our new authorities to stabilize our financial system. Even though that really isn’t what the program was for. We launched our capital purchase program the following week when we announced that nine of the largest U.S. financial institutions, holding approximately 55 percent of Read more

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