Imagine yourself at a used car dealership. Some guy in a bad suit with slick hair is trying to sell you “the perfect” car. You are 16 years old, so you don’t have a ton of money to buy a car. This sales guy shows you a car, talks about the features and its dependability. To top it off, the car is a convertible!!
Your thinking to yourself, “this is great. A car I can afford, dependable, AND it is a convertible. I’ll take it!”
You sign the papers and the dealer brings the car around. It is the make, model, and color as promised, but it’s not a convertible. You fight, argue, but to no avail. The papers are signed and that is that.
This must be how the market feels today. Why? On Wednesday, Treasury Secretary Henry Paulson said the government will no longer use the $700 billion bailout fund to buy illiquid assets from banks.
Say what?!?
Wasn’t that one of the main selling points of the bailout plan? Wasn’t that to be the way we get the banks loaning to one another and businesses again?
It seems at this point that the government has a relatively blank check to now use as it seems fit. There are rumors of using the bailout money to invest directly into banks, bailout the Big 3 in Detroit, and/or help other credit institutions become banks (see American Express).
Those may all be great and valid ideas, but it is a bit confusing… They should have known it would take a long time to implement the bill, meaning, they probably knew before todays announcement that it would not work. So, if the $700 billion was not intended to buy illiquid assets, why the urgency to pass the bailout plan? Was it just to get some “sweetners” (other wise knows as kickbacks) passed for all the “good old boys” in D.C.?
In the meantime, the uncertainty from the Treasury continues to hurt equities. Investors are bailing out of stocks and putting their money into bonds. That is great for interest rates, which are now getting close to the mid 5’s for a 30 year fixed. However, at some point, don’t we need to start rooting for some good news for our economy? Today’s announcement failed to deliver some much needed good news and uncertainty will continue its reign on the markets.
Clay Jeffreys is a Mortgage Consultant with Hillside Lending, LLC and writer for “Blog Pertaining to the Acquisition of a Mortgage to Purchase a Domicile.” Hillside Lending seeks to provide mortgage brokerage services with the highest standards of service, care, honesty, integrity and value; concentrating on owner-occupied, residential financing. For more information about available programs and interest rates, please visit www.hillsidelending.com.
