Headlines...

NEW -> Contingent Buyer Assistance Program
<p>mino - What <strong>almost</strong>? It is a ponzi scheme.</p>

<p>Eva - Check out this article. The only issue I have with it is the person who thinks the Fed can influence the credit markets. From what I can tell, the Fed has no power in the ABS type credit markets.</p>

<p><a href="http://money.cnn.com/2007/09/19/markets/debt_markets/index.htm?postversion=2007091910">http://money.cnn.com/2007/09/19/markets/debt_markets/index.htm?postversion=2007091910</a></p>

<p> </p>
 
The Treasurey and how it keeps needing to up it's debt limit it so it can meet it obligations. Not exactly like a Ponzi Scheme but similar.
 
<p>The Federal Reserve sent the stock market soaring yesterday. So can it stop the decline in home prices, too?</p>

<p><a target="_blank" href="http://www.nytimes.com/2007/09/19/business/19leonhardt.html?ex=1347940800&en=782bbc7a8fea8114&ei=5124">Don’t count on it</a>.</p>
 
From Calculated Risk:





<a href="http://calculatedrisk.blogspot.com/2007/09/saudi-arabia-refuses-to-cut-rates.html">Saudi Arabia Refuses to Cut Rates</a>

<p>From The Telegraph: <a href="http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/09/19/bcnsaudi119.xml">Fears of dollar collapse as Saudis take fright</a> </p>

Saudi Arabia has refused to cut interest rates in lockstep with the US Federal Reserve for the first time, signalling that the oil-rich Gulf kingdom is preparing to break the dollar currency peg in a move that risks setting off a stampede out of the dollar across the Middle East.





"This is a very dangerous situation for the dollar," said Hans Redeker, currency chief at BNP Paribas.





Saudi Arabia has $800bn (£400bn) in their future generation fund, and the entire region has $3,500bn under management. They face an inflationary threat and do not want to import an interest rate policy set for the recessionary conditions in the United States," he said.





The Saudi central bank said today that it would take "appropriate measures" to halt huge capital inflows into the country, but analysts say this policy is unsustainable and will inevitably lead to the collapse of the dollar peg. This ties back to my <a href="http://calculatedrisk.blogspot.com/2007/09/fed-funds-cut-watch-long-rates.html">post yesterday</a> on a possible vicious cycle. To attract sufficient foreign capital flows to cover the U.S. current account deficit, interest rates in the U.S. may need to rise significantly.





The Greenspan conundrum was that long rates didn't rise at the Fed Funds rate was increased. Bernanke's conundrum may be that long rates don't fall (or maybe even increase) as he lowers the Fed Funds rate!
 
WASHINGTON (AP) -- Shifting course, Treasury Secretary Henry Paulson planned to tell Congress he would consider allowing the big mortgage companies Fannie Mae and Freddie Mac to temporarily buy, bundle and sell as securities those loans exceeding $417,000.

<p>This change, which the Bush administration opposed in the summer, is portrayed as a way to inject liquidity into the stretched mortgage market. </p>

<p>Paulson said the change involving jumbo loans could occur only in tandem with tighter oversight of the two government-sponsored mortgage companies...</p>
 
So, your think the Fed cut will save the day ...

<p>


<a href="http://www.bloomberg.com/apps/news?pid=20601085&sid=a.Iup2b4XNsA">http://www.bloomberg.com/apps/news?pid=20601085&sid=a.Iup2b4XNsA</a> </p>
 
<i>"Paulson said the change involving jumbo loans could occur only in tandem with tighter oversight of the two government-sponsored mortgage companies..."</i><p>


I wonder if Paulson has given thought to the idea that it might be difficult to oversee companies that can't even produce a 10-Q; let alone tighter oversight. But, he won't let a little thing like facts get in the way.
 
<p>What makes expanding the loan limits so funny is both Fannie and Freddie traded higher on the news. Ok yeah that makes sense. Since no one wants the garbage loans but since FNMA and FRE will take them they aren't garbage any more. Because they will buy the loans it will make them default proof. </p>

<p>All is good now. Fed rate cuts combined with larger loan amounts and The Hammer changing his tone means this whole mess is fixed. I guess I will just draw from my HELOC to buy some houses and invest in the M1 tranches of some MBS pools. </p>
 
Do you get the feeling all this gyration by the government is A tale told by an idiot, full of sound and fury, signifying nothing. Or perhaps they are simply urinating on a forest fire...







 
Is the price of oil going up? Or is the dollar just becoming worth less? Time - 6:09 PDT and the dollar is 78.79, an all time historic low. Does the US get most of it's oil from Canada or Saudi Arabia? No matter. The Loonie is now on par with the USD and SA is decoupling their currency from the USD. Can you blame them? With the rate cut, Bernanke just told them all that they can go pound sand.
 
<p>In other news, Bear Stearns reports a YoY profit drop of <strong><u>61%</u></strong>! They admitted that their fixed income business dropped by 88%, year over year. Anyone know if they've begun allowing redemptions yet?</p>

<p><a href="http://money.cnn.com/2007/09/20/news/companies/bear_stearns_earnings/index.htm?postversion=2007092009">Link</a> </p>
 
<strong>Are we headed for an epic bear market?</strong>


The credit bubble is just starting to unwind, a credit-derivative insider says. And while U.S. borrowers are being blamed for the mess, they were really just pawns in a global game.


<a href="http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx">http://articles.moneycentral.msn.com/Investing/SuperModels/AreWeHeadedForAnEpicBearMarket.aspx</a>
 
<a href="http://news.yahoo.com/s/ap/20070920/ap_on_bi_ge/paulson_mortgages">news.yahoo.com/s/ap/20070920/ap_on_bi_ge/paulson_mortgages</a>

<p class="MsoNormal">"Federal Reserve Chairman Ben Bernanke told Con<a></a>gress Thursday the credit crisis has created "significant market stress" and offered fresh assurances that regulators would take steps to curb fallout related to the mortgage mess."</p>

<p class="MsoNormal">"Bernanke promised lawmakers that the Fed will take steps to crack down on abusive or bad lending practices."</p>

<p class="MsoNormal">Is that a little like closing the barn door after the cows had ran out?</p>

<p class="MsoNormal" />

<p class="MsoNormal" />
 
<p>The Gentleman from Louisiana: "I just want to make clear with my understanding, is it still your view that any modification of the portfolio would be ill advised unless done in concert with an appropriate GSE reform".</p>

<p>BB just said "First of all, lets be clear you are talking about the conforming loan limits and not the portfolio", </p>

<p>Louisiana: "Correct, I'm sorry"</p>

<p>BB continues, "my primary concern is If this goes ahead without any reform, that somehow reform may not ever happen or be effective, so I do believe it's important that this be done, if it is done, in the context of meaninful GSE reform". "Um, If it is done, as I indicated, I think it needs to be TEMPORARY, and, uh, if it's not prompt it's not going to be productive because, uh, these markets will recover OVER THE NEXT FEW MONTHS and, uh, if this come online in March it'll be counterproductive."</p>

<p>Temporary ? Recover over the next few months ?? WHAT ??</p>
 
They keep talking about how raising the conforming loan limit will only be temporary, and only to assist those in the subprime debacle.
 
<em>"these markets will recover OVER THE NEXT FEW MONTHS"</em>





This is like the Waxman tobacco hearings when he had all the CEOs get up and lie. Everyone in the room knew it was a lie including the people speaking. Same thing.
 
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