Fed Easing Liquidity in Funding Markets

[maddezmom]

Source: AP

WASHINGTON (AP) -- The Federal Reserve on Tuesday ramped up efforts to provide more relief to squeezed financial institutions, a coordinated action with other central banks aimed at easing a global credit crises that threatens to push the U.S. economy into its first recession since 2001.

The Fed said it will make up to $200 billion in Treasury securities available to big Wall Street investment houses and banks. The new action is designed to ensure that there is an ample supply of Treasury securities. With strains in financial markets, demand has grown for Treasury securities, considered the safest investment in the world because they are backed by the U.S. government.

On Wall Street, the Fed's action propelled stocks upward. The Dow Jones industrials jumped more than 170 points in morning trading.

The move comes as banks and other financial institutions face cash crunches.

"Pressures in some of these markets have recently increased again," the Fed said in a statement. "We all continue to work together and will take appropriate steps to address those liquidity pressures." The other banks involved are the Bank of Canada, the Bank of England, the European Central Bank and the Swiss National Bank.

The Fed announced the creation of a new tool, called the Term Securities Lending Facility (TSLF), geared to provide primary dealers -- big Wall Street investment firms and banks that trade directly with the Fed -- with 28-day loans of Treasury securities, rather than overnight loans. They would pledge other securities -- including federal agency residential-mortgage-backed securities, such as those of mortgage giants Fannie Mae and Freddie Mac -- as collateral for the loans of Treasury securities.



Read more: http://biz.yahoo.com/ap/080311/fed_credit_crisis.html?.v=21

[fascisthunter]

1. Feds to Bail Out Millionaires

America is nothing more than a fucking Country Club of weak minded greedy losers and the rest of us pay taxes directly to them. Wake the fuck up Americans...

[Speciesamused]

8. I concure...

:grouphug:

[Magleetis]

13. You nailed it

Can't have the rich folks running out of cash can we now.

[gasperc]

2. convienent how they can print money

lend it borrowers and act like it has no negative consequences, except for runaway inflation, luckily there's no evidence of that

[politicaholic]

7. Your right...but you have to keep people profiting rather than learning...

under the "No Millionair Left Behind Act" of 2000 it is imperative that taking a loss because of your own stupid greedy actions can never happen.

[Tempest]

3. Another fix for the junkie

And next week they'll need another one.

[HCE SuiGeneris]

4. Yes!!! More debt!!! Woohoo!!!

Thank you Fed!!!

:puke:

[fasttense]

5. Bailout for bushes cronies while the middle class is left to pay the bills. n/t

[splat]

6. So will this drop the mortgage rates?

My daughter is trying to buy a home and the FHA rates went UP a quarter of a point yesterday.

Will this bring them down again?

[Zynx]

9. It will provide at least some measure of stability to the mortgage backed securities market.

That should, to at least a degree, reduce rates, but the impact is indirect.

[PSPS]

10. Your question should be "will prices come down?"

One thing I've learned in the last few months is that the asking price for virtually all properties is way out of line. With toxic mortgages drying up, so has the "demand." Now, people usually have to actually qualify for a mortgage and show they can afford to buy the property. No more of these "option ARM's" and other shenanigans.

You can't use comps to determine value any more. Instead, I use rents for comps in a market to determine true value. Just last week, a friend found a house asking $575,000 that had been on the market for over 60 days. Despite the protests of the realtor, they made an offer for $350,000. (The house was occupied by the original owner for over 30 years and it was paid off.) They eneded up buying it for $415,000 -- a whopping 28% off the asking price.

[splat]

12. In a budget price range, there isn't so far to fall

The house she is looking at is asking $159,900, down from $199,900 a few months ago.

She is planning to offer $137900 (she's prequalified for $150000, which is where she thinks it may end up.

But at 6.25, with PMI etc., that's still a bit more than the monthly nut she hoped for. With a mortgage of his own, there may not be much wiggle room.

So a drop in the FHA 30-year might get more people into homes than what sounds like more trickle-down fairies.

[PSPS]

14. Nice job!

That's a nice job -- the house is already off 20% from the original asking price.

If the house has been on the market for "a few months," don't be surprised if her 137,9 offer is taken.

At that rate, the difference is about $73 per month on a 30-year fixed.

[splat]

17. To you and me, $73/mo isn't much, but to a mama with a kid...

This is who FHA was supposed to help.

[HCE SuiGeneris]

16. The FHA has multiple interest rates. It all depends on how

the loan is structured. You can drastically reduce your rate by buying it down. The key is to determine where the break-even point lies. If you will hold on to the mortgage for a long time (over 4-5 years), buy the rate down if you can afford it.

[splat]

18. Does buy it down mean pay off principal? How to structure?

Bank says FHA, 3 percent, 6.25. Where's the structurable part?

[HCE SuiGeneris]

19. You can pay points to buy the rate down as you would with a conventional loan.

The loan officer should have a rate sheet with the varying options.

Link provides an example: http://www.mortgage101.com/Rates/FHARateSearch.asp?p=mtg101
I in no way am endorsing or advocating this site. Just throwing it out as a tool to explore scenarios.

[Javaman]

11. Rinse repeat.

I vaguely recall this happening once before, but pshaw on me, the market dictates otherwise.

I mean honestly, wouldn't a bail out actually make the market go up?

Oh that's right. It's a bail out for the rich, who then get their money, then BAIL OUT of the market.

[olddad56]

15. inflating the money supply by another $200 billion, should do the trick,

if 200 a barrel oil is your goal.