Treasury Plan to Freeze Mortgage Rates

"More than 30 percent of borrowers with subprime adjustable-
rate mortgages are behind on their payments before their loans
reset at a higher rate, according to estimates from analysts at
Credit Suisse Group. The bank projects 775,000 homes with $143
billion of mortgage debt will go into foreclosure in the next
two years."



Subprime_cHence, the political and economic motivation for doing something — anything — rather than look like they are just sitting there.

Which leads us to the just announced "rescue" plan. While it isn’t exactly binding, it does have the support of "major investors." I assume this refers to the various banks, brokerages and funds that own the increasingly worth less and less (though not "worthless") paper.

The terms of the plan applies to "loans originated between Jan. 1, 2005, and July 31,
2007, that reset between Jan. 1, 2008, and July 31, 2010." According to the WSJ, the Office of
Thrift Supervision Director John Reich said that "the plan
could help "tens of thousands" of homeowners."

Tens of thousands? The subprime foreclosure forecast for 2008-09 is over 3/4 of a million homes.

The WSJ asked readers, Do you support the Treasury’s plan to freeze rates on some mortgages? Their answer was quite similar to mine:


I am not sure why the rest of the crowd voted no, but I can tell you my reasons: This plan does nothing to address the issues which led to the snafu in the first place:

• The FOMC, who took rates down to historic lows, and left them there for a year;

• Ratings agencies, (not unlike the equity scandal of the 1990s) were in cahoots with underwriters, to the detriment of investors;

• The Federal Reserve, in their capacity of over-seers of the Banking industry, failed to supervise the rampant issuance of irresponsible debt;

I am sure you can think of additional reasons as to why this is unlikely to have a major impact. (Use the comments for this).



U.S. Mortgage Delinquencies Rise to 20-Year High
Kathleen M. Howley
Bloomberg, Dec. 6 2007

Bush and Paulson Unveil Plan To Aid Struggling Homeowners
WSJ, December 6, 2007 2:44 p.m.

Question of the Day
Do you support the Treasury’s plan to freeze rates on some mortgages? Forums, Thu Dec 06, 2007 2:28 pm

Category: Credit, Derivatives, Economy, Psychology, Real Estate, Taxes and Policy

Underwriting the SubPrime Crisis

Category: Credit, Derivatives, Finance

“High End” Inflation

Category: Economy, Employment, Finance, Inflation

NFP: Birth/Death Adjustments

One of the things we have harped on for quite a long time here at The Big Picture is the flawed BLS Birth Death Model (BDM). Since 2003, the B/D adjustment has been part and parcel to BLS’ Current Employment Statistics (CES) program, the official measure of US employment. In brief, the Birth Death adjustment…Read More

Category: Data Analysis, Economy, Employment, Psychology

Cody and Jim Rogers on Fox Business

Category: Books, Economy, Federal Reserve, Inflation

Amazon’s Most Wished For, Most Gifted, and Best Selling Items

Category: Books, Consumer Spending, Film, Music


Congrats to my pal Paul the K on his new web TV gig with Yahoo:

Yahoo TechTicker To Go After CNBC Crowd: The show will be called TechTicker, and it launches
in January. The goal is to attract the CNBC crowd – people who want to be
immersed in finance news all day long.  The hosts include Henry Blodget (Silicon Alley Insider), Sarah Lacy (Business Week columnist) and
Paul Kedrosky, plus one additional person who
has yet to be named. The team will produce 10-20 original segments per week day,
which will be shown live on the site. When live content isn’t streaming, old
content will show on a loop.

Look out, Howard, they are coming after you!


via TechCrunch

Category: Financial Press, Video, Web/Tech

Inflation IN-Inflation

Category: Commodities, Inflation

Jobs Surge!

Category: Economy, Employment, Media

What is Temp Work Saying About GDP and NFP?

Category: Data Analysis, Economy, Employment