FOMC Chairman, Ben Bernanke, is scheduled to speak on the Fed’s new talking points in just over an hour and a half.  I would expect the Chairman to say something like inflation is their primary concern (duh) and that they are slightly concerned still with revelations in the credit markets. At some point we will have all of the information about the derivative action that the hedge funds have been involved in with relation to the MBS market. I don’t expect that will be the case for another couple of months.  However, the news this morning from Freddie Mac that they have suffered a $2B loss in Q3 of 2007 should make a lot of the people out there who have been saying we have all of the information and this problem is only a “sub prime” problem, take notice.  I would expect that many new “revelations” will take place after Thanksgiving and before Christmas when the markets are typically pretty quiet.

Housing start numbers were off this morning as well as the new home permit numbers were down and the only numbers that were up a bit were new multi-family starts in some areas.

tags: bernanke, fed, fomc, freddie mac, mortgage

The Fed will be making an announcement tomorrow and the media as well as everyone else who doesn’t know what they are talking about, are hoping that they will announce a rate cut of some sort. While this will bring increased liquidity into the financial markets, it doesn’t mean the housing market will improve or be saved…or that Jane and John Doe who are losing their house will have a solution to help them. The issue today is that lenders have stopped making high leverage loans (loans with Loan to Value ratios above 80% as an example) to just about everyone. The people that need these loans the most, are the people that 1) have something like this in place and can’t afford it and probably never could and 2) are the ones losing their houses. A FFR cut is not going to help these people as it will have NO effect on lender’s lending policies and standards. As Lonnie said this morning in his email:

Everyone is waiting for the Fed announcement tomorrow and is hoping a Fed rate cut will rescue the housing and mortgage markets. As I stated once before, a rate cut may create liquidity in the financial markets, however, investors still need to believe mortgage lenders are making quality loans.

People need to understand that increased liquidity at this point merely helps people who have credit and the ability to support it, to borrow at cheaper rates. Lending guidelines are still extremely tight and that is not likely to change until the fat is trimmed from the housing market.

tags: bernanke, bubble, fed, fomc, foreclosure, housing market, interest rates

Well, I can smell blood in the water, and apparently B of A could as well. Yesterday’s late announcement that B of A would pick up $2B of Countrywide’s preferred stock (that means that if Countrywide goes under, preferred stock holders have access to assets) and the deal funded today.  Good pick up for BofA as Countrywide is the nation’s biggest loan servicing company I believe.  I hope the idea of the country’s largest residential mortgage lender being in serious trouble has your attention.

In other news, the Fed lowered the Discount Window Rate from 6.25% to 5.75% in an emergency session last week after announcing they would not change it…interesting, I wonder who called them to change their minds.  They also increased the amount of time banks can borrow from the window to 30 days, probably more significant than lowering the discount rate. Comparing this to the Fed Funds Rate (the rate that banks borrow from each other) for 30-day money @ 5.5%, and you can see that this makes letting other banks borrow money from you, if you are a bank, more palatable.  Personally, I think this is pretty irresponsible and almost as irresponsible as Senator Chris Dodd’s comments the other night on Hardball. I didn’t write anything about his blaming the vast majority of the mortgage market problems on mortgage brokers because I was pretty pissed. I think what he said is irresponsible and shows that he is no different than the rest of the BS finger pointers looking for a scapegoat on Capitol Hill. The really crappy part is that he chairs the Banking, Housing and Urban Affairs Committee up there. More proof that we simply need to kick all of the people in Congress out of office and start from scratch.

A great write up on the recent Fed action and the difference between the Discount Rate and the Federal Funds Rate.

tags: banking, bofa, chris dodd, countrywide, discount rate, fomc, fed, fed funds rate