News From Last Week
It was a busy week last week in financial markets and mortgage rates rose following Wednesday's Fed announcement and ended the week higher for the first time in a few weeks. Demand for the $101 billion in last week's Treasury auctions was average, and foreign investors purchased a healthy 29% to 33% of each auction. The stock market ended the week with little change. Nearly all of the movement in mortgage rates during the week was related to the Fed meeting.
In anticipation of the announcement of favorable new Fed actions, mortgage rates actually moved lower early in the week. Some investors were looking for the Fed to expand its purchases of Treasury securities, which would be positive for mortgage rates. Those investors were disappointed, however, as the Fed announced no new initiatives. The Fed made no change in rates, holding the fed funds rate close to zero. According to the Fed, the economic outlook has "improved modestly" since the March 18 meeting. A lack of new Fed programs and confirmation of improved economic prospects pushed mortgage rates higher.
Overshadowed by the Fed meeting, an important report on first quarter Gross Domestic Product (GDP) presented data which supports the Fed's economic outlook. GDP fell -6.1%, which was significantly weaker than the consensus forecast. However, a breakdown of the GDP report reveals that the weak headline number for the first quarter may not be reflective of the current condition of the economy. GDP fell more than expected mainly due to declines in inventories and business investment. Consumer spending actually far exceeded expectations. If this trend continues, then businesses will have to begin to rebuild depleted inventories, lifting future economic activity.
Looking Ahead
The important Employment report will come out on Friday. As usual, this data on the number of jobs, the Unemployment Rate, and wage inflation will be the most highly anticipated economic data of the month. Early estimates are for a loss of about 620K jobs in April. Before the Employment Data, Pending Home Sales and Construction Spending will come out on Monday. Pending Home Sales is a leading indicator for the housing market. The ISM Services index will be released on Tuesday, while Productivity is scheduled for Thursday. There will be large Treasury auctions on Tuesday, Wednesday, and Thursday. The results of the government's stress tests for 19 large financial institutions will be released on Thursday.
Have a great week and when you think of financing, please think of Fairfield!
Monday, May 4, 2009
Tuesday, March 10, 2009
This Week's News
Last week, concerns about prolonged weakness in the economy caused investors to sell stocks and buy relatively safer investments, including mortgage-backed securities (MBS). This, plus the fact that the Fed purchased more MBS than in any prior week, resulted in mortgage rates falling a little during the week.
For months, leading economists have been predicting that the economy will perform poorly during the first half of this year, and Friday's Employment report was right in line with those forecasts. The economy lost 651K jobs in February, and the December and January figures were revised lower by a total of -161K. The Unemployment Rate jumped to 8.1% from 7.6% in January, which was the highest level since December 1983.
Borrowers interested in refinancing their loans under the Financial Stability Plan received some additional guidance last week. The program is designed to assist homeowners whose loans are owned or guaranteed by Fannie Mae or Freddie Mac, who are current on their payments, and where the loan amount is no more than 105% of the value of the home. A website (www.financialstability.gov) provides guidance on how to determine if a particular loan is owned or guaranteed by Fannie or Freddie and whether the borrower may qualify under this program. Additional details of the program are expected over coming months.
Looking Ahead
The Economic Calendar has a light schedule this week. Thursday's Retail Sales report will be the primary economic data. Retail Sales account for about 70% of economic activity. Import Prices, Consumer Sentiment, and the Trade Balance will be released on Friday. Fed Chief Bernanke is scheduled to speak on Tuesday. Treasury auctions and new information on government programs also may have an impact next week.
Saturday, January 24, 2009
Market Update
Mortgage Rates Rise Sharply
Although nothing has fundamentally happened over the last week to push mortgage rates higher, rates have indeed soared greatly over the last seven days. But why? I offer you three main reasons:
1. Supply and Demand. With rates falling as low as 4.5%, mortgage lenders have locked in more loans than they can handle over the last month. It is natural to see rates bump up a bit after they have been so low. Don't forget that there are 50% less loan officers out there today than there were two years ago. The mortgage industry is clogged right now and it's going to take a few weeks or longer for things to resume to normal. Higher rates will enable everyone to catch up a bit.
2. Investor Fees. With mortgages paying off more quickly due to the super low rates, investors are not paying as much in the secondary market for these loans. Mortgage lenders are in turn charging a little bit more to offset this loss of income. This has contributed to the recent rise in rates.
3. The Silly Government. Fannie Mae and Freddie Mac, now run by the government, implemented higher fees beginning last week that make it more expensive for many to take out a Conforming loan. These fees will impact those making smaller down payments, those with credit scores under 740, and even those buying condo's. Yes, this is very counterproductive to the aims of the Federal Reserve to lower mortgage interest rates but they are doing it because they feel that this risk based pricing policy will make their Mortgage Backed Securities more valuable on the secondary market. The bottom line is that mortgage rates have pushed up a good .5% over the last week and are now over 5%. I believe the surge is temporary and that we will see rates drop below 5% again in the days / weeks ahead.
Hello to Down Payment Assistance?
Last week, there was a bill introduced in Congress that would reinstate seller-funded downpayment assistance (DPA). With the minimum FHA down payment rising to 3.5% effective Jan 1st, it would be great news to see the 100% option come back again.
Good-Bye to Interest-Only Loans!
Fannie Mae announced this past week that they will no longer purchase "interest-only" loans. About five years ago, interest-only loans came out of the blue and all of a sudden were available on most any program at little or no premium. They were the rage with it seems like every other borrower obtaining this feature. During 2008, the cost of obtaining an interest-only loan jumped to about 1 discount point which more or less eliminated this as a good option. And, now, the feature is being buried with many of the other programs and features that rose to prevalence over the last decade.
News from Last Week
Good news last week with inflation. The December Consumer Price Index (CPI) declined -0.7% from November, mostly due to lower energy prices. The core CPI rate, which excludes food and energy, rose a scant 1.8% from one year ago. The December Producer Price Index (PPI) report contained similar results, and inflation concerns are nonexistent right now. All of the other economic reports showed continued weakness in the economy. It is worth reporting that oil prices fell last week to $35 per barrel, down from $145 in July!
A Great Idea Our own Senator from GA, Johnny Isakson, has just introduced legislation to jump-start housing demand and to boost the economy by expanding the home buyer tax credit passed by Congress last year. The final version of the legislation that was signed into law last year only included a tax credit for first-time home buyers that must be repaid over a 15-year period. The legislation introduced by Isakson today would expand that tax credit to include all purchasers and would eliminate the current requirement that it be repaid. Repayment of the tax credit would only be required if the home is sold within three years. Hopefully, this bill gets passed because it sure seems like it would offer a pretty big incentive for many to buy! Rate Update Mortgage rates are sharply higher this week but still at super low levels not seen since the 1950's!
Have a great week and when you think of financing, please think of Fairfield! To unsubscribe, please notify me at jaw@fairfieldmortgage.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied. All Rights Reserved.
Although nothing has fundamentally happened over the last week to push mortgage rates higher, rates have indeed soared greatly over the last seven days. But why? I offer you three main reasons:
1. Supply and Demand. With rates falling as low as 4.5%, mortgage lenders have locked in more loans than they can handle over the last month. It is natural to see rates bump up a bit after they have been so low. Don't forget that there are 50% less loan officers out there today than there were two years ago. The mortgage industry is clogged right now and it's going to take a few weeks or longer for things to resume to normal. Higher rates will enable everyone to catch up a bit.
2. Investor Fees. With mortgages paying off more quickly due to the super low rates, investors are not paying as much in the secondary market for these loans. Mortgage lenders are in turn charging a little bit more to offset this loss of income. This has contributed to the recent rise in rates.
3. The Silly Government. Fannie Mae and Freddie Mac, now run by the government, implemented higher fees beginning last week that make it more expensive for many to take out a Conforming loan. These fees will impact those making smaller down payments, those with credit scores under 740, and even those buying condo's. Yes, this is very counterproductive to the aims of the Federal Reserve to lower mortgage interest rates but they are doing it because they feel that this risk based pricing policy will make their Mortgage Backed Securities more valuable on the secondary market. The bottom line is that mortgage rates have pushed up a good .5% over the last week and are now over 5%. I believe the surge is temporary and that we will see rates drop below 5% again in the days / weeks ahead.
Hello to Down Payment Assistance?
Last week, there was a bill introduced in Congress that would reinstate seller-funded downpayment assistance (DPA). With the minimum FHA down payment rising to 3.5% effective Jan 1st, it would be great news to see the 100% option come back again.
Good-Bye to Interest-Only Loans!
Fannie Mae announced this past week that they will no longer purchase "interest-only" loans. About five years ago, interest-only loans came out of the blue and all of a sudden were available on most any program at little or no premium. They were the rage with it seems like every other borrower obtaining this feature. During 2008, the cost of obtaining an interest-only loan jumped to about 1 discount point which more or less eliminated this as a good option. And, now, the feature is being buried with many of the other programs and features that rose to prevalence over the last decade.
News from Last Week
Good news last week with inflation. The December Consumer Price Index (CPI) declined -0.7% from November, mostly due to lower energy prices. The core CPI rate, which excludes food and energy, rose a scant 1.8% from one year ago. The December Producer Price Index (PPI) report contained similar results, and inflation concerns are nonexistent right now. All of the other economic reports showed continued weakness in the economy. It is worth reporting that oil prices fell last week to $35 per barrel, down from $145 in July!
A Great Idea Our own Senator from GA, Johnny Isakson, has just introduced legislation to jump-start housing demand and to boost the economy by expanding the home buyer tax credit passed by Congress last year. The final version of the legislation that was signed into law last year only included a tax credit for first-time home buyers that must be repaid over a 15-year period. The legislation introduced by Isakson today would expand that tax credit to include all purchasers and would eliminate the current requirement that it be repaid. Repayment of the tax credit would only be required if the home is sold within three years. Hopefully, this bill gets passed because it sure seems like it would offer a pretty big incentive for many to buy! Rate Update Mortgage rates are sharply higher this week but still at super low levels not seen since the 1950's!
Have a great week and when you think of financing, please think of Fairfield! To unsubscribe, please notify me at jaw@fairfieldmortgage.com. The information contained herein is believed to be accurate, however no representation or warranties are written or implied. All Rights Reserved.
Sunday, December 21, 2008
LOW rates!
Rates Hit the Lowest Point of My Lifetime
Friday, mortgage rates dropped to the low point of our generation with the 30 year fixed hitting 4.25% in the morning before rising by day's end back up to 4.625% where it stands today. Rates rose Friday afternoon out of sheer reaction to how many people locked in to rates in the morning. These dramatically low rates are the reaction of the following series of events that occurred earlier in the week:
1. Tuesday's very favorable CPI inflation report showed prices dropping sharply and, for now, inflation is not a concern for investors.
2. Tuesday's Housing Starts report showed a 19% decline to a record low of 625K annual units, far below the consensus forecast of 730K. Building Permits, a leading indicator, showed a similar decline. To give you a contrast, Housing Starts were running at a 2.2 million unit annual pace in early 2006. On a favorable note, the slowdown in the building of new homes will help reduce the inventory of unsold homes on the market.
3. Friday, the Fed cut the Fed Fund rate from 1.0% to nearly 0.0% and suggested that they might purchase large quantities of Mortgage Backed Securities and Treasuries (over and above the previously announced $500 billion plan) to help keep mortgage rates low. The Fed's statement confirmed that economic conditions have worsened recently and suggested that rates will remain at extremely low levels for an extended period of time.
Article Courtesy of James Williamson, Fairfield Mortgage
Thursday, December 4, 2008
Possible Rate Drop to 4.5%!!!
From the WSJ today:
WASHINGTON -- Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market.
Under one proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.
If enacted, such a plan would be an unprecedented opportunity for anyone with good credit and a solid income who could qualify for a mortgage at the lowest rates on records dating to the early 1960s, said Keith Gumbinger, senior vice president at financial publisher HSH Associates.
"You would have the mother of all re-fi booms," said mortgage industry consultant Howard Glaser.
The goal of the industry's proposal would be to take advantage of the unusually large difference, or spread, between mortgage rates and yields on government debt. On Wednesday, the yield on the 10-year Treasury note yield sank as low as 2.65 percent, while the national average rate on a 30-year fixed rate mortgages was 5.75 percent, according to HSH Associates.
In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and a 30-year mortgage rate, but that spread currently hovers around 3 percentage points.
Analysts said that the government could use its ability to borrow money at low rates to in essence flood the market for mortgage-backed securities. This increased demand would tend to push down the yield on mortgage securities sold by Fannie and Freddie, which now average about 5.5 percent because of investor concerns about default risks. Once those yields fall, the theory goes, lower mortgage rates should follow.
That would have two benefits for the economy: Immediately adding money to the pocketbooks of homeowners who can refinance their mortgages and reduce their monthly payments, and eventually help arrest the slide in home prices since much lower mortgage rates would allow more potential buyers to qualify for loans.
"The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound," said Greg McBride, senior financial analyst at Bankrate.com.
If the government does buy up mortgage securities, it would be similar to the effort announced last week by the Federal Reserve to purchase up to $500 billion of mortgage-backed securities from Fannie and Freddie. The two mortgage giants, which were seized by federal regulators in September, own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt.
The Fed, however, did not announce a specific target for mortgage rates, which plunged about a half percentage point after the announcement.
That caused new mortgage applications to more than double last week, according to the Mortgage Bankers Association's weekly survey released Wednesday. Refinance volume more than tripled, and made up for nearly 70 percent of all applications.
Still, the industry plan is not likely to help borrowers whose credit is so damaged that banks don't want to lend to them.
"It doesn't do anything to help all the borrowers facing foreclosures," said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. "It's going to benefit the people who have equity in their home, who have decent credit and can refinance."
Treasury is considering several options, and could announce a decision as early as next week, industry sources said.
Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions the department may take in the future.
The proposal was reported Wednesday afternoon on The Wall Street Journal's Web site.Treasury could make such a proposal as part of a request for the second $350 billion of the $700 billion financial rescue fund, industry sources said.
Treasury Secretary Henry Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks, while not doing enough to help homeowners facing foreclosure.
In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.
The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.
Meanwhile, the National Association of Home Builders is leading a new "Fix Housing First" coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.
WASHINGTON -- Financial industry lobbyists are urging the Treasury Department to take steps to lower mortgage rates and help stabilize the battered U.S. housing market.
Under one proposal, Treasury would seek to lower the rate on a 30-year mortgage to 4.5 percent by purchasing mortgage-backed securities from Fannie Mae and Freddie Mac, Scott Talbott, chief lobbyist at the Financial Services Roundtable, said Wednesday.
If enacted, such a plan would be an unprecedented opportunity for anyone with good credit and a solid income who could qualify for a mortgage at the lowest rates on records dating to the early 1960s, said Keith Gumbinger, senior vice president at financial publisher HSH Associates.
"You would have the mother of all re-fi booms," said mortgage industry consultant Howard Glaser.
The goal of the industry's proposal would be to take advantage of the unusually large difference, or spread, between mortgage rates and yields on government debt. On Wednesday, the yield on the 10-year Treasury note yield sank as low as 2.65 percent, while the national average rate on a 30-year fixed rate mortgages was 5.75 percent, according to HSH Associates.
In recent years, there has been about a 1.8 percentage point difference between the yield on a 10-year Treasury note and a 30-year mortgage rate, but that spread currently hovers around 3 percentage points.
Analysts said that the government could use its ability to borrow money at low rates to in essence flood the market for mortgage-backed securities. This increased demand would tend to push down the yield on mortgage securities sold by Fannie and Freddie, which now average about 5.5 percent because of investor concerns about default risks. Once those yields fall, the theory goes, lower mortgage rates should follow.
That would have two benefits for the economy: Immediately adding money to the pocketbooks of homeowners who can refinance their mortgages and reduce their monthly payments, and eventually help arrest the slide in home prices since much lower mortgage rates would allow more potential buyers to qualify for loans.
"The goal is drive mortgage rates so low that home prices not only stop falling but begin to rebound," said Greg McBride, senior financial analyst at Bankrate.com.
If the government does buy up mortgage securities, it would be similar to the effort announced last week by the Federal Reserve to purchase up to $500 billion of mortgage-backed securities from Fannie and Freddie. The two mortgage giants, which were seized by federal regulators in September, own or guarantee about half of the $11.5 trillion in U.S. outstanding home loan debt.
The Fed, however, did not announce a specific target for mortgage rates, which plunged about a half percentage point after the announcement.
That caused new mortgage applications to more than double last week, according to the Mortgage Bankers Association's weekly survey released Wednesday. Refinance volume more than tripled, and made up for nearly 70 percent of all applications.
Still, the industry plan is not likely to help borrowers whose credit is so damaged that banks don't want to lend to them.
"It doesn't do anything to help all the borrowers facing foreclosures," said Guy Cecala, publisher of Inside Mortgage Finance, a trade publication. "It's going to benefit the people who have equity in their home, who have decent credit and can refinance."
Treasury is considering several options, and could announce a decision as early as next week, industry sources said.
Treasury spokeswoman Brookly McLaughlin said she would not comment on speculation about actions the department may take in the future.
The proposal was reported Wednesday afternoon on The Wall Street Journal's Web site.Treasury could make such a proposal as part of a request for the second $350 billion of the $700 billion financial rescue fund, industry sources said.
Treasury Secretary Henry Paulson has been criticized by members of Congress for using the bailout money to shore up Wall Street banks, while not doing enough to help homeowners facing foreclosure.
In recent weeks, a diverse set of industry groups from real estate agents to carpet makers have called on lawmakers and the incoming administration of President-elect Barack Obama to subsidize lower mortgage rates and beef up tax credits to help stimulate housing demand.
The National Association of Realtors has been pushing a plan under which the federal government would spend $50 billion to lower mortgage rates. It says doing so would yield about 500,000 more home sales.
Meanwhile, the National Association of Home Builders is leading a new "Fix Housing First" coalition to push for aid to the ailing housing sector, including a tax credit of up to $22,000 for anyone who buys a home before the end of 2009.
Monday, October 13, 2008
World Markets Soar After Last Week's Plunge
HONG KONG — Global stock markets rebounded strongly on Monday after last week's historic sell-off as governments from Europe to Australia and the U.S. intensified efforts to ease a financial crisis that threatened to the throw the world into recession.
Hong Kong's Hang Seng Index, which tumbled more than 7 percent Friday, soared 1,434.33 points, or 9.69 percent, to finish at 16,231.20.
Australian and Singapore indices jumped more than 5 percent, while South Korean and Chinese benchmarks added around 3.7 percent.
As markets opened in Europe, Britain's FTSE-100 shot up 5.6 percent, Germany's DAX climbed 6.4 percent and France's CAC-40 advanced 7 percent.
In Japan, where the Nikkei 225 tanked nearly 10 percent Friday to close out its worst week in history, trading was closed for a public holiday.
Markets around the world sprung to life as nations expanded their efforts to save a financial system, reeling from seizing credit markets and risky debt, that threatened to throw the global economy into recession.
On Monday five central banks — including the U.S. Federal Reserve and the European Central Bank — unveiled new measures to thaw frozen credit markets and bolster funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.
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In Britain, three of the country's largest banks — Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC — announced plans to take up to 37 billion pounds (US$63 billion) of government money to boost their balance sheets.
Earlier in the day, Australia said it would guarantee bank and other lender deposits for three years.
The moves came after leaders of the 15 euro-zone countries said Sunday they would guarantee new bank debt until the end of 2009, allow governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalizion.
The global effort brought a measure of relief after investor panic sent world equities markets spiraling last week in one of the steepest declines in decades.
"The government measures genuinely do help market confidence," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. "We are reaching a point where policy could soon start to have an impact on the credit markets and once it does that will help the equity markets."
In the U.S., investors were waiting to see if the Treasury Department's newly announced plan buy equity in troubled banks would help stabilize the volatility on Wall Street. Lawmakers have urged quick action by President George W. Bush on the effort, to be funded by the US$700 billion bailout he signed Oct. 3.
Wall Street stock futures showed a rebound was in store for the major indexes ahead of the opening bell on Monday. Dow Jones industrials futures rose 331 points, or 3.9 percent, to 8,701. Nasdaq 100 futures rose 51.7, or 4 percent, to 1,334; and Standard & Poor's 500 futures added 43, or 4.8 percent, to 934.04.
In a volatile session Friday in New York, the Dow Jones industrial average fell 128, or 1.49 percent, to 8,451.49, gyrating within a 1,000 point range. The average had its worst week on record in both point and percentage terms.
Financials helped lead Monday's advance in Asia, with leading Chinese lender Industrial & Commercial Bank of China, or ICBC, soaring 13.6 percent. Leading Australian banks such as Commonwealth Bank of Australia and ANZ Banking Group Ltd were also up sharply. Commodity issues gained as well.
Elsewhere in the region, Indonesia's key index, down sharply in early trade, gained 0.9 percent after the lifting of a trading suspension, imposed last Wednesday amid a freefall in share prices. The upswing followed government measures to free up liquidity, including easing regulations for share buybacks and corporate financial reserve limits.
Taiwan's benchmark index closed down 2.15 percent after the market was shut Friday for a national holiday.
Oil prices recovered, with light, sweet crude for November delivery up US$3.33 at US$81.03. The contract fell Friday US$8.89 to US$77.70, the lowest price since Sept. 10, 2007.
In currencies, the greenback gained against the yen to 100.57. The 15-nation euro bought US$1.3532.
** Article posted on www.FoxNews.com
Hong Kong's Hang Seng Index, which tumbled more than 7 percent Friday, soared 1,434.33 points, or 9.69 percent, to finish at 16,231.20.
Australian and Singapore indices jumped more than 5 percent, while South Korean and Chinese benchmarks added around 3.7 percent.
As markets opened in Europe, Britain's FTSE-100 shot up 5.6 percent, Germany's DAX climbed 6.4 percent and France's CAC-40 advanced 7 percent.
In Japan, where the Nikkei 225 tanked nearly 10 percent Friday to close out its worst week in history, trading was closed for a public holiday.
Markets around the world sprung to life as nations expanded their efforts to save a financial system, reeling from seizing credit markets and risky debt, that threatened to throw the global economy into recession.
On Monday five central banks — including the U.S. Federal Reserve and the European Central Bank — unveiled new measures to thaw frozen credit markets and bolster funding to banks. The Bank of England, the European Central Bank and the Swiss National Bank said they would provide unlimited U.S. dollar funds to financial institutions. The Bank of Japan said it was considering similar measures.
/**/
In Britain, three of the country's largest banks — Royal Bank of Scotland Group PLC, Lloyds TSB Group PLC and HBOS PLC — announced plans to take up to 37 billion pounds (US$63 billion) of government money to boost their balance sheets.
Earlier in the day, Australia said it would guarantee bank and other lender deposits for three years.
The moves came after leaders of the 15 euro-zone countries said Sunday they would guarantee new bank debt until the end of 2009, allow governments to help banks by buying preferred shares, and vowed to rescue important failing banks through emergency recapitalizion.
The global effort brought a measure of relief after investor panic sent world equities markets spiraling last week in one of the steepest declines in decades.
"The government measures genuinely do help market confidence," said Daniel McCormack, a strategist for Macquarie Securities in Hong Kong. "We are reaching a point where policy could soon start to have an impact on the credit markets and once it does that will help the equity markets."
In the U.S., investors were waiting to see if the Treasury Department's newly announced plan buy equity in troubled banks would help stabilize the volatility on Wall Street. Lawmakers have urged quick action by President George W. Bush on the effort, to be funded by the US$700 billion bailout he signed Oct. 3.
Wall Street stock futures showed a rebound was in store for the major indexes ahead of the opening bell on Monday. Dow Jones industrials futures rose 331 points, or 3.9 percent, to 8,701. Nasdaq 100 futures rose 51.7, or 4 percent, to 1,334; and Standard & Poor's 500 futures added 43, or 4.8 percent, to 934.04.
In a volatile session Friday in New York, the Dow Jones industrial average fell 128, or 1.49 percent, to 8,451.49, gyrating within a 1,000 point range. The average had its worst week on record in both point and percentage terms.
Financials helped lead Monday's advance in Asia, with leading Chinese lender Industrial & Commercial Bank of China, or ICBC, soaring 13.6 percent. Leading Australian banks such as Commonwealth Bank of Australia and ANZ Banking Group Ltd were also up sharply. Commodity issues gained as well.
Elsewhere in the region, Indonesia's key index, down sharply in early trade, gained 0.9 percent after the lifting of a trading suspension, imposed last Wednesday amid a freefall in share prices. The upswing followed government measures to free up liquidity, including easing regulations for share buybacks and corporate financial reserve limits.
Taiwan's benchmark index closed down 2.15 percent after the market was shut Friday for a national holiday.
Oil prices recovered, with light, sweet crude for November delivery up US$3.33 at US$81.03. The contract fell Friday US$8.89 to US$77.70, the lowest price since Sept. 10, 2007.
In currencies, the greenback gained against the yen to 100.57. The 15-nation euro bought US$1.3532.
** Article posted on www.FoxNews.com
Thursday, October 2, 2008
Senate Passes "Bail Out Bill"
The Senate passed the $700 billion economic-rescue package by a 74-25 margin on Wednesday night, just two days after the House had rejected a similar bill.
Legislators had spent a feverish two days putting together this revised package, hoping to appease both liberal Democrats and conservative Republicans, who had expressed major reservations about the legislation.
Congressional leaders, as well as President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, had pressed over the past week for this package, which they said was necessary to stop a financial meltdown.
Paulson released a statement on Wednesday night saying, “I commend the Senate for tonight’s strong, bipartisan vote. This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going. I urge the House to act promptly to pass this bill.”
Both major presidential candidates, Republican John McCain and Democrat Barack Obama, voted in favor of the bill.
Click here to see how your state legislators voted
While the legislation is fairly complex, in basic form it offers a way for financial institutions to get some of their most-toxic securities off their books, with the federal government taking them over. This bill authorizes the Treasury Secretary to have up to $700 billion of securities “outstanding at any one time,” though the approval for the full $700 billion would come in stages.
The bill passed in the Senate differed from the rejected House legislation in a number of ways. Federal Deposit Insurance Corp. insurance will be raised temporarily to $250,000 from $100,000. In addition, there were changes to the Alternative Minimum Tax and incentives for small business, among other things.
Click Here to Read
Because the bill had to be one that was already under consideration, it was basically substituted in for a mental-health parity bill, a measure the Senate voted on before considering the legislation itself, and approved by a vote of 74-25. However, some mental-health parity provisions were included in the measure.
Sen. Bernie Sanders (I-Vt.) had proposed an amendment that would create a surtax on those making over $500,000 a year, but it was defeated.
The bill will now journey to the House. A vote there is expected sometime on Friday, Rep. Barney Frank (D-Mass.) told FOX Business. It’s still expected to have a much tougher run there. Every House seat is contested in the early-November election, which means the Representatives are more mindful than their Senate counterparts of the opposition from constituents.
That opposition is still strong. The Web site survey on FOXBusiness.com, which is not a scientific poll, indicates that only 12% of respondents support passage of the rescue package, while 15% want a better explanation of what’s in it. A full 73% say they understand what’s in it and just don’t want it.
Part of the challenge for those in favor of the bill is that it’s meant to help the credit markets, which are less visible. The stock market, which suffered one of its worst days in history on the day the House rejected the bill, is suffering but still liquid.
Activity in the credit markets is extremely low, with banks hesitant to lend to each other, or to customers. The fear of market and economic experts is that such a lack of money flow will devastate an already weak economy.
Legislators had spent a feverish two days putting together this revised package, hoping to appease both liberal Democrats and conservative Republicans, who had expressed major reservations about the legislation.
Congressional leaders, as well as President George W. Bush, Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke, had pressed over the past week for this package, which they said was necessary to stop a financial meltdown.
Paulson released a statement on Wednesday night saying, “I commend the Senate for tonight’s strong, bipartisan vote. This sends a positive signal that we stand ready to protect the U.S. economy by making sure that Americans have access to the credit that is needed to create jobs and keep businesses going. I urge the House to act promptly to pass this bill.”
Both major presidential candidates, Republican John McCain and Democrat Barack Obama, voted in favor of the bill.
Click here to see how your state legislators voted
While the legislation is fairly complex, in basic form it offers a way for financial institutions to get some of their most-toxic securities off their books, with the federal government taking them over. This bill authorizes the Treasury Secretary to have up to $700 billion of securities “outstanding at any one time,” though the approval for the full $700 billion would come in stages.
The bill passed in the Senate differed from the rejected House legislation in a number of ways. Federal Deposit Insurance Corp. insurance will be raised temporarily to $250,000 from $100,000. In addition, there were changes to the Alternative Minimum Tax and incentives for small business, among other things.
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Because the bill had to be one that was already under consideration, it was basically substituted in for a mental-health parity bill, a measure the Senate voted on before considering the legislation itself, and approved by a vote of 74-25. However, some mental-health parity provisions were included in the measure.
Sen. Bernie Sanders (I-Vt.) had proposed an amendment that would create a surtax on those making over $500,000 a year, but it was defeated.
The bill will now journey to the House. A vote there is expected sometime on Friday, Rep. Barney Frank (D-Mass.) told FOX Business. It’s still expected to have a much tougher run there. Every House seat is contested in the early-November election, which means the Representatives are more mindful than their Senate counterparts of the opposition from constituents.
That opposition is still strong. The Web site survey on FOXBusiness.com, which is not a scientific poll, indicates that only 12% of respondents support passage of the rescue package, while 15% want a better explanation of what’s in it. A full 73% say they understand what’s in it and just don’t want it.
Part of the challenge for those in favor of the bill is that it’s meant to help the credit markets, which are less visible. The stock market, which suffered one of its worst days in history on the day the House rejected the bill, is suffering but still liquid.
Activity in the credit markets is extremely low, with banks hesitant to lend to each other, or to customers. The fear of market and economic experts is that such a lack of money flow will devastate an already weak economy.
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