Rescue plan continued...

Again, I do not know the author of these articles, but the person knows what he or she is talking about!

Yesterday politicians ran head long into the real issue; that unless there is some sort of plan to re-ignite the credit markets the economy will tank in a major recession that could last longer than their tenures in the House. The House failed in their responsibility to pass the package, doing the politically expedient thing and listening to their constituents that unfortunately in this case are not well informed. The stock market had its biggest point loss in history and hopefully shook the ground under those House members that were too weak to do what needs to be done, regardless of the consequences. With the headlines this morning many of those citizens that didn't understand were given a lesson in financial markets.

Markets rebounded today but still ended the day lower than the close last Friday. There is now a 100% chance a plan will be done by the end of the week; likely on Thursday. The Senate is set to vote on a plan with some changes from the House bill tomorrow.

House Republican conservatives are likely to keep pressing for a mandatory insurance program they initially proposed for mortgage-backed securities. They may also try to force the Securities and Exchange Commission to suspend mark-to-market accounting and require bank regulators to assess the real value of the troubled assets, lawmakers say. Either measure could drive away Democratic votes. The Senate may also consider expanding the authority of the Federal Deposit Insurance Corp. Under one plan, pushed by House Republicans, the FDIC would issue lenders certificates they could use as capital, which the banks would have to pay back with interest. The proposal would give the FDIC more say in how the institutions are run. Democrats say they may also seek stronger oversight on the rescue plan, tougher limits on executive compensation and more relief for homeowners facing foreclosure. (Bloomberg)

Mortgages were hit hard today; lower in price than the improvement yesterday. The mortgage market is likely to have a tougher time than treasuries until there is a plan passed. Potential mortgage investors are not going to step into the pool until they know how deep it is.

Case/Shiller said prices of residential houses in the 20 large markets fell 16.3% yr/yr, the fastest pace on record, signaling the worst housing recession in a generation had yet to trough even before this month's credit crisis. Home prices decreased 0.9% in July from the prior month after declining 0.5% in June, the report showed.

Probably the most impacting result of the House failure yesterday, and the one that should have been beaten into the heads of those on both sides that don't get it, money-market rates climbed even after the Federal Reserve yesterday more than doubled the size of its dollar-swap line with foreign central banks to $620B. In Europe, banks borrowed dollars from the ECB today at almost six times the Fed's benchmark interest rate. Overnight Libor climbed 431 basis points to an all-time high of 6.88% today for overnight lending rates. It above all else is a report card of just how bad the banking crisis is becoming.

Tomorrow's economic data; the ADP Sept employment guess at 8:15; at 10;00 Aug construction spending (-05%), also the Sept ISM manufacturing index (50.0 frm 49.9). Sept auto and truck sales will be reported tomorrow.

Nothing but the rescue package is of importance now. A doable plan MUST be accomplished this week, those Republicans and Democrats that want to act like real heroes to the homefolk got a wake up call yesterday and hopefully realize this isn't a debating society game; that the system is teetering on the edge. Must piss them off that they will actually have to take direct responsibility for their actions and have to work to explain it to their constituents that still believe this is a Wall Street bail out of the rich. By the way, the so-called rich pay 90% of the taxes.

Our Politicians Have Failed Us Yet Again...

I would like to give credit to whoever penned this article; however, I do not know who it is...

The House failed to pass the rescue plan; Republicans rebelled and so too 90 Democrats. A shame that the election is five weeks away; all House members are up for election. As we send this out there is nothing definite as to what the House will do now, most likely they will come together and work something out. Once again after the plan failed we are back to two question of what to do now, and is this necessary? It is necessary! No one likes it, everyone is angry about how Wall Street and Washington caused this mess. There is more bad info flowing on the blogs than ever; most of them sent to us by subs are so far off the mark, no wonder American citizens are generally opposed to this; in and of itself, understanding this mess requires years of professional experience and even that isn't enough at times. People, this is not a bail out plan as was tagged a few weeks ago; the media named it and created a huge deflection away from the problem. This is not a bail out of Wall Street, but Main St.

One idea that is getting a lot of blog talk is to simply let the government issue some form of insurance policy to insure that banks won't suffer with the junk, but that isn't the issue. Banks are squarely on the edge with no cash and less trust of the system as we have been warning for months. Yes it is sub prime and other stupid borrowing and investing(by banks) using excessive and destructive leverage, but banks need liquidity now as credit markets are essentially locked down. Just having the government issue insurance against losses still leaves the junk at the bank, banks need cash and insurance against losses won't generate cash rapidly enough. Most blogs dealing and commenting on the current credit crisis in the financial markets should be ignored.

One good idea to help that has been talked about some this afternoon is to have FDIC issue a statement and say all deposits up to $1 mil would be protected if a bank would fail. A good idea, but again that isn't enough. The financial system needs to be liquefied quickly and so far the only plan that makes that possible is to actually buy the crap from the banks---at deep discount. If there isn't something done the stock market could decline another 2000 points and the US and global economies would suffer a prolonged very deep recession, lasting years.

Given the depth and seriousness of the situation, there is every likelihood a deal will get done. It may now take a day or two (possibly Thursday) to get it done with the Jewish holidays starting tomorrow and many members will not work tomorrow. The US stock market was slapped hard today on the failure, next the global stock markets will be beaten hard when they resume. Banks are falling, so far it is the big ones; next up will likely be National City even though it isn't saddled with a huge portfolio of sub primes, it is leveraged to the hilt and needs cash. Nat City's stock was off 56% from Friday and is trading at about $1.62/share. The longer this continues the worse it will be, there will be a long-lasting recession--- deeper than any since the Depression; jobs will be lost by the 10s of thousands, the housing situation will deteriorate further, otherwise "good" banks will be dragged under.

Crude oil and commodity prices declined in huge selling betting now that the global and US economies are going to decline to a protracted economic slump. Darkest before the dawn? Once those that voted against the plan today see the results of the inaction we believe there will be a sea change in thinking.

Investors are running at light speed to protection of US treasuries. 3 mo T-Bill rate 0.406%, FF rates 0.12%, 2 yr note 1.71% -40 basis points today.

Mortgage prices today were dragged higher by treasuries, didn't look good. Still don't want to hold rate locks overnight as not sure how or what may occur overnight.