11/2/07

Crises and markets

Henry Paulson, the US Treasury Secretary, is seeking to persuade the White House to offer financial compensation to American mortgage lenders that try to help troubled homeowners by renegotiating the terms of their loans.

The Times has learnt that Mr Paulson is lobbying President Bush to provide funds so that mortgage lenders can reduce the loss that they would incur from either reducing the rate of an adjustable home loan or extending the life of the mortgage to make it cheaper for the property owner.

It is understood that Mr Paulson’s proposals are meeting significant resistance within Washington, where it is perceived that such a move would be a bank bail-out scheme.

It is going to happen. I always believed it (see previous blogs). The government will bail out the financial institutions and some borrowers. That we like it or not.

The subprime/housing/derivative fiasco is a problem that will stay with us for several years, as the S&L collapse of the late 1980s.

Markets will enjoy this extra shot of liquidity. Now as then.

More on http://www.peterdag.com/.

George Dagnino, PhD
Editor, The Peter Dag Portfolio
Since 1977

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