Archives for October 2008

Federal Rate Cut felt Globally

How do you think that the USA will react over the Federal Reserve cutting the rates by 0.5 percent to its all time lowest level of 1.5 percent in over four years. This drop is an attempt to try and improve the lending that keeps the U.S. economy moving forward.

Bank of America, Wells Fargo and other banks cut their prime rate by half a point to 4.5 percent, also the lowest in more than four years, after the Fed announced its decision early Wednesday.

For millions of Americans, the Fed’s cut means borrowing money becomes less expensive. Home equity loans, credit cards and other floating-rate loans all fluctuate depending on what the Fed does.

Following in step with USA, Central banks in England, China, Canada, Sweden and Switzerland and the European Central Bank, South Korea, Hong Kong and Taiwan also cut rates.

Today, the market (Wall Street) closed at its’ lowest since 2003 even though the Fed cut rates on Wednesday. Globally people are hoping for an upward change in the markets on Friday.

Senate passes Bailout – Making Sense of it All

The Senate passed the 700 Billion dollar Bailout of Freddie Mac and Fannie Mae today.  I am curious if everyone out there knows what these companies do and why the Government stepped in to help out.

First, to help clear some of the confusion, these two companies are mortgage guarantors.  Fannie Mae was created back in the Great Depression by Roosevelt’s administration to back loans by private banks in order to make homeownership more assesible.  Years later the government allowed Fannie Mae to be privately managed. Freddie Mac was created by the government to keep Fannie Mae from becoming to big.

Fannie Mae and Freddie Mac guarantee more than $5 trillion in mortgages, almost half of those in the United States, With many of the mortgages defaulting, the companies are, in effect, bankrupt.  These two companies are such a large part of our financial system that failure of one or both would be detrimental Nationally and Globally.

This takeover was put in place to protect us, the taxpayer. How, well the U.S. government will be creating more demand in the marketplace by buying Fannie and Freddie mortgage bonds, homeowners and buyers should start seeing lower mortgage rates.  This may become one of the best times to purchase or refinance your home.

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