Smart Borrower Blog

Archive for September, 2008

700 Billion Dollar Bailout Fails

I received an alert today from the Washington Post telling me that the $700 billion bailout for Wall Street banks had failed to pass the House.   It is pretty obvious that Americans have sent a message to the elected representatives in Washington.   A recent poll online showed several days ago that 81% of Americans were against it, as well they should. Because this is an election year, I think that most elected officials have listened to their constituency.   With 30 some days to election time, I am sure that this 81% would vote with their pocketbooks, and... more »

Another One Bites The Dust

First Bear Stearns, then Fannie and Freddie.   Now Lehman Brothers and IndyMac.   Today Washington Mutual.   Dash away, dash away, dash away all.   It seems the vultures have come home to roost on Wall Street.   Instead of making hay while the sun shines, the Wall Street gang is dancing to pay the piper. According to the Nightly News tonight, Washington Mutual hit the skids today, making it the largest bank failure in American history.   U.S. regulators seized the bank on Thursday. The reason given was poor choices in the mortgage market.   JP Morgan, Chase... more »

Mortgage Rates Rise, Applications Fall, and Officials Debate the Bailout

The U.S. mortgage industry saw rising interest rates and declining demand in the latest week, as officials in Washington battled over the Bush administration’s proposed bailout of several major financial companies. According to the Mortgage Bankers Association Wednesday, the average rate on a 30-year fixed rate home loan, excluding points, rose to 6.08 percent from 5.82 percent the previous week.   Rates on 15-year fixed rate loans averaged 5.84 percent, up from 5.54 percent and one-year adjustable rate mortgages carried an average rate of 7.01 percent, an increase from 6.95 percent the week before. During the same week, the MBA... more »

The Financial Industries’ Bailout

All day long, I have been getting emails from political action groups such as Democracy For American and True Majority urging me to call Senator Levin to put a stop to the new proposal to bail out Wall Street banks.   I have spent a lot of today reading both sides of the issue, and I am convinced that in the end, American taxpayers are putting an awful lot of cash on the line. This would be the largest bailout in history.   The White House tells us me must do this to avoid economic collapse.   I think that... more »

All The King’s Men

The obvious news this week has to be the fall of AIG, and the government’s intervention that insures it will not fail.   As taxpayers, we now own two mortgage companies and an insurance company, and reaction to this news is not good.   The nightly news sees this as something that must be done in order to keep the economy stable.   That may very well be, but when you see us taking on 1 trillion dollars more in debt as taxpayers, we get a bit anxious. Not since the Great Depression have we been in such a financial... more »

Fed Holds Interest Rate Steady on Inflation Concerns

In spite of a slower economy and an ailing mortgage market, the Federal Reserve refrained from changing its key interest rate Tuesday. The federal funds rate, the fee banks charge each other for overnight transfers, has been held at 2.0 percent since April of this year. The rate has an impact on banking and mortgage interest rates, affecting the general ease or difficulty of obtaining   financing. In its press release, the Federal Open Market Committee (FOMC) recognized the current strains on the economy, saying “strains in financial markets have increased significantly and labor markets have weakened further. Economic growth... more »

Shakeout In The Financial Sector

It is appropriate tonight to report on the fall of Lehman Brothers, who I posted on Friday night.   The evening news was conducted from CNBC headquarters tonight to discuss the fall of Leham and others.   Wall Street took a tremendous hit today, falling over 504 points, and the biggest fall in history.   All this bloodletting is due to the financial news on LB, Merrill Lynch and AIG. Last night just after midnight, LB filed for bankruptcy in Federal court.   Shares of LB were down 93% today off its January peak. According to The Associated Press today,... more »

Lehman Brothers Takes A Tumble

It had to happen sooner or later - even on Wall Street, where it seems that the big banks are invincible, trouble rears its ugly head.   I have been hearing rumors about Lehman Bros, but it wasn’t until this week that things begin to come to light about the state of affairs at that firm.   Since Monday, the firm’s market capitalization has lost 78 percent, to about $2.5 billion from $11.2 billion. Uncertain about what form a possible deal to rescue the firm would take, Wall Street sent its message, and shares of LB plunged to a 14... more »

Mortgage Demand Up in Latest Week But Home Sales Unlikely to Increase in Coming Months

While the Mortgage Bankers Association reported that the number of mortgage applications increased this week, the National Association of Realtors is forecasting that total home sales will remain at a virtual standstill for the next several months. The MBA’s data revealed that mortgage demand rose by a seasonally adjusted 9.5 percent from the week before, with refinance loan applications jumping up by 15.4 percent and home purchase loan applications increasing by 6.4 percent. Of all the applications filed in the latest week, 36.3 percent were refinance mortgage requests, compared with 34.0 percent one week earlier. Yet even as the MBA... more »

The Other Shoe Just Fell

If you have followed my meanderings for any time at all, you have seen the concern I have for the fate of Fannie and Freddie. Even though I am no economic analyst, the rest of the news I get on a daily basis does keep me informed, and I knew that sooner or later, they would fall. Fall they did. Sunday, the Fed announced that they are taking the pair over. Treasury Secretary Henry Paulson, in an interview on Monday, said the takeover was designed in a way that would protect American taxpayers. Huh? Who is getting stuck with the... more »