Monday Madness

The action happening on Wall Street, behind closed doors with The Fed, and the economy certainly isn't hurting mortgage rates, however with every piece of good news there is bad and the fact remains the economy is heading further into the tank!

In a desperate and awkwardly timed move the Fed cut its discount rate a .25% to 3.25% just 1 day ahead of their regularly scheduled meeting on Tuesday. This was an extremely weird and trying move as seen by most in both Washington and Wall Street. Perhaps the U.S. economy and in particular the U.S. Financial Sector is in much worse shape than most anticipated. This could be seen hitting home as Bear Stearns agreed to be bought out by JP Morgan Chase for just $236M! To explain to you how much of a discount this was rumors have been floating that Bear Stearns new headquarters was worth upwards of $1B. This move also required the help of the Fed and opening their money or "discount window" to Bear Stearns via JP Morgan Chase. Loans now made through the discount window are now due in 90 days instead of the traditional 30. They have also opened their "window" to unprecendented larger amount of banking institutions as a means of further hoping to help the "credit freeze" via trying to free up liquidity among the financial sectors and in particular large banking firms.

Will this move work? It might bode well for the larger institutions however lending guidelines for the "consumer level" residential mortgage purchases are becoming more and more strict. I've said this time and again what good do these moves do if the "consumer" cannot get financing for residential mortgages? Don't get me wrong before August 2007' we were on the extreme left end of financing but with that being said we have moved to the extreme right. Hopefully we will find a happy medium some where in the middle in the very near future.

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