Bernanke: “Vigorous Response”
March 4th, 2008Could a 0.75% cut really be on the table!?
Via: Bloomberg:
Federal Reserve Chairman Ben S. Bernanke, battling the worst housing recession in a quarter century, urged lenders to forgive portions of mortgages for more borrowers whose home values have declined.
“Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping, but more can, and should, be done,” Bernanke said in a speech in Orlando, Florida today. “Principal reductions that restore some equity for the homeowner may be a relatively more effective means of avoiding delinquency and foreclosure.”
Bernanke’s call goes beyond the stance of the Bush administration and previous Fed comments. By comparison, the central bank’s Feb. 27 report to Congress called for lenders to “pursue prudent loan workouts” through means such as modifying mortgage terms and deferring payments.
“Delinquencies and foreclosures likely will continue to rise for a while longer,” Bernanke said in the comments to the Independent Community Bankers of America. “Supply-demand imbalances in many housing markets suggest that some further declines in house prices are likely.”
Subprime borrowers are about to see their mortgage rates increase more than 1 percentage point, he said. “Declines in short-term interest rates and initiatives involving rate freezes will reduce the impact somewhat, but interest-rate resets will nevertheless impose stress on many households.”
`Vigorous Response’
In the past, homeowners could refinance, though that option is now “largely” gone because sales of bonds backed by subprime mortgages “have virtually halted,” Bernanke said. “This situation calls for a vigorous response.”
Bernanke didn’t comment in his speech text on the outlook for the economy or interest rates. Traders expect the Federal Open Market Committee to lower the benchmark rate by 0.75 percentage point by or at the panel’s next meeting on March 18, based on futures prices.
A lending rate of 2.25%, and inflation may be as high as 10% and is certainly at least as high as 6%. Am I the only one who is having the feeling of having died and gone to a Monty Python skit??? They’re gonna run those damn printing presses at supersonic speeds until those poor overworked machines throw off their gears!
Changing points of view,and plans week to week it would seem.
Treasury has nothing to do with Fed I guess is the reason.
http://readingeagle.com/article.aspx?id=64097
One more thing: the US Dollar Index momentarily slipped all the way down to 73.35 today before rebounding back to 73.75.
well, the simple fact of our situation is this: everyone is not going to survive. To improve your own personal chances, first, consider your own personal financial circumstances … do so with honesty, integrity, and with both eyes wide open. Include your partner. Unless you have some means of multiplying your assets faster than They can devalue them, don’ t invest: you would be better off using your assets to protect your loved ones and yourself, either through the acquisition of useful skills, tools, or tradeable goods.
ultimately, morality is what we can afford.
never forget the old maxim: “The value of a thing, is what that thing will bring.”
we are in for dark times, indeed.
cybele
If he keeps dropping the rates something new might hit the investment scene: USD Carry Trade. It’s pretty volatile right now, but if Bernake puts the rate down below 2% that’s something we might actually see happen.
@Harflimon,
Re: USD carry trade: It’ll be currency controls from soup to nuts as desperate dollar holders try to get to an exit.
But the majority of dollar holders won’t have anywhere to go. They will be screwed over and possibly lose up to 20% of the value. Since the market is oversaturated with dollars some people will just take the loss and move forward. Especially everyone holding a 401k/IRA/savings account. There is quite a bit of money that Middle Class america controls that won’t be going anywhere (besides down). And eventually it will stabilize and if Americans start producing again it may even rebound. But the days of dollar dominance are numbered and the investors know it and that’s who’s running for the door. I suppose it just depends on how much they are worth and if it’s enough to seriously destroy the entire global economic order. I may be underestimating them.
Of course this all gets nullified if an Amero is really around the corner like some say.