U.S. BANK BAILOUT PLAN: DEAL OR NO DEAL?

An excerpt from Mortgage Market Guide brought to us by Gillian Meadows with Humphries Mortgage (for full length article, click here):

DEAL OR NO DEAL? It appears a deal has indeed been struck, as Congressional leaders and the Bush administration announced they had come to an agreement to spend up to $700 Billion on the historic Bailout Plan.

But first - a look back at the past week, leading up to the weekend announcements.

There were several major developments, beginning with the announcement that Japan's Mitsubishi Financial Bank will purchase 10% to 20% of Morgan Stanley, saving the company from the same bankruptcy fate as Lehman Brothers. On Wednesday, the financial markets received another vote of confidence with word that billionaire investor Warren Buffett's Berkshire Hathaway is investing $5 Billion into Goldman Sachs. But then on Thursday, Washington Mutual was seized by the federal government, and its assets were sold to JP Morgan Chase for $1.9 Billion. The fall of Washington Mutual represents the biggest US bank failure in history.

But perhaps the biggest news of the week began on Tuesday, as Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson began their testimony in front of the Senate Banking Committee on the $700 Billion rescue plan proposed by President Bush.

The plan calls for taking illiquid mortgage backed securities off the hands of lending institutions, and through the week several elements of the plan were intensely debated, including the amount of the plan, the government's role, the absence of oversight, and limits on pay for executives of bailed-out financial institutions. And while full details are still pending, it appears that an agreement has been reached, with the intent to revive our financial system and avoid negative far reaching effects to the rest of our economy.

Despite all the historic events of the week, home loan rates ended the week only around .125 percent worse than where they began. I will continue to monitor this situation closely in the days and weeks ahead, and keep you informed.

To read the full length article, click here.