The Federal Reserve plans to lend up to $200 billion of Treasury securities in exchange for debt including private mortgage-backed securities that have slumped in value as homeowners defaulted on their payments.
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“There is no truth to the liquidity rumors,” Russell Sherman, a spokesman for New York-based Bear Stearns, said in an interview. Rumors have been floating around for about a week. Are agitators taking advantage of the market? Granted, nobody really knows who holds tainted paper but the picture is getting clearer. However, as anybody who has been under attack can testify, it is very hard to disprove a negative when allegations are not based on facts to begin with. Of course some rumors may be based in fact.
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One news article urges people to be smart about their biggest investment – their home – while another article says people are giving up. I suppose it depends on your track record and your lender. Some mortgage lenders have nothing to lose either way, such as HSBC, where losses continue to mount and investors are urging the bank to dispose of HSBC Finance. Unfortunately nobody wants to buy the troubled unit, once known as Household International. Yes, it is a good idea to be smart about your biggest investment, but logic and intellect tells us to be realistic.
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Edward P. Lazear, chairman of President Bush’s Council of Economic Advisers, said the White House had downgraded its earlier forecasts but still believed that the tax rebates of up to $1,200 for many families will help the economy escape a recession. President Bush said on Wednesday that the United States is not experiencing a recession. The stock market opened lower the following day and closed the week well down in the 11,000 range at 11,893.69. Many people regarded Bush’s comments as a pipe dream.
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Fallout from investments in the United States, subprime debt, and commercial paper has spread around the world. Some countries are feeling the impact as infection in the US has spread to the real economy around the world.
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