Happiness Over, Time to Think... by Milota Sidorova

FED has taken over two mayor financial concerns of United States last weekend. That was possibly the best news spreading all over country. More explicit backing companies holding almost half of American home loans naturally brought up nor positive however, mixed feelings.

There's been an expectation to help homeowners to escape their foreclosures and dropping mortgage rates, making the loans for about 9 percent of total loan owners unaffordable.
Despite of many American financial companies almost immediately rose on the market this morning, the step seems to be affective in longer than long term period.

First of all, it's more than clear enough that someone gets hurt by this. According the Bloomberg financial channel, first to go should be common shareholders, preferred stock investors, senior preferred and bondholders.

Vincent Reinhart of American Enterprise Institution claimed it was only the pure start, but it certainly had good impact on mortgage market. And it's true that soon after FED declared it officially, a lot of mortgage rates have dropped soon after. So the mayor indexes were rising.

However, Senator Dodd told Bloomberg he was more skeptical and had some questions whether the whole restructure will have an implication on homeowners, shareholders and taxpayers. One's for sure it will, so the question remains: How huge? He also suggested the take over will help only first time buyers, while those already having their homes for several years will not be affected positively at all.

It's going to take a while to move things over.

FED has already declared the four step plan towards next 15 month run. Government has expanded guidelines for the Federal Housing Administration which backs loans to borrowers with poor credit and small down payments. FED called it conservatorship Run. It should also focus on Senior preferred stock purchase as well as credit facility at NY FED and mortgage backed securities purchase.

Has the Government done enough?

According Bill Gross, PIMCO Co-CIO, the Government has already taken necessary steps. It opened up the wallet, although haven't spend any money yet. He also referred that treasury for now has done enough, when asked whether Government should be much more aggressive indicating to buy much more bonds and consequently lifting the value of debt backing and mortgage security.

At the end, Freddie and Fannie's case has another, not less important impact – once you start lending, you can't stop. Reinhart said he was expecting more lobby in Congress to back up several enterprises in need.
If he could – why not me? How can Government resist those background networks?


related story: http://news.yahoo.com/s/ap/mortgage_giants_consumer_impact;_ylt=AskwsJcPykB_xhoEt5wID9is0NUE

by Milota Sidorova for PocketNews (http://pocketnews.tv)

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edited by Beata Biskova