The $700 billion bailout has a goal of restoring market confidence and stability, but is it enough, and does it even address the right problem?
Because of the make up of the pieced mortgage security pools, it is impossible to determine the value of the securities. It is impossible to determine how much is needed to purchase the bad mortgages. It is impossible to determine the potential loss.
The markets are not really responding well to the hope of the rescue plan. The Asian markets have dropped. The Wachovia sale has been announced today, despite the hope of this rescue. Two European banks are being nationalized.
Do the markets see this $700 billion rescue as enough to address the problem?
The mortgages are bad because the home owners are not making payments. The mortgage securities' asset values cannot be established because the income stream from homeowner monthly payments is not dependable.
Home values are uncertain because of the increasing inventory, caused in part by the growing foreclosure problem.
The rescue plan is short on details about how foreclosures are to be addressed.
Will the Treasury be able to modify individual mortgages that will change the yields on mortgage security pools?
There just is too little information about how this plan will be able to impact mortgage terms that are the root cause of foreclosures.
As I write this post, the Federal Reserve has just increased the limits on short term lending outlets by several hundred billion dollars. This action is being done in coordination with other national central banks.
Is this money really addressing the cause of the crisis?
It just does not seem to me that it is, and that may be the real problem with the $700 billion rescue plan.
Richard Smith
American Acceptance Mortgage, Inc
Toll Free 888-474-9920 Cell 423-280-0345
Home financing in Tennessee, Georgia, and Alabama.
Experience matters when it is your home loan.
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Mortgage lending offices located in Chattanooga, TN
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Richard Smith Conventional, FHA, FHA 203k, HUD $100 down purchases, VA, Jumbo VA, Rural Development, Jumbo, FannieMae Homepath, Home Equity Line of Credit (HELOC). |
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The billion dollar question is the question that you asked. Will this $700 billion bailout really work?
I don't think anything thinks this is the fix all for the ills of our economy. However, it might be a pretty tough sell for the next leg of the fix.
I agree this may not solve the problem. I believe its just a temporary fix. A huge overpriced government band-aid at the expense of the taxpayers. It may help short term, but its just to mop up the current bubble. What about all the other industries affected and that will fall related to this. Even the automakers are asking for a bailout now. Where will it end?
Richard.. this is still a tought topic.. Even if the bail out goes forward... Will it stop the bleeding or just a band-aid on a open wound ?