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.