Wednesday, March 25, 2009

Credit Flowing Freely

The US Treasury announced its plan today to purchase up to $500 Billion worth of existing assets and loans that are in danger of defaulting from banks. The reason they are doing this…to clean up the balance sheet of these banks in the hopes that they will start lending money again. The economy needs credit to begin flowing again, not contracting. Credit lines, credit cards, mortgages, car loans have all been drying up over the past year and it has been damaging this country’s ability to conduct business.

The government will start by committing up to $100 Billion immediately and see how this works. Once this money has been used they will analyze the effects and continue with their plan and use all of the $500 Billion or maybe more if the plan is working. If it is not working?? I guess they will figure something else out.

One thing is for sure…Wall Street definitely liked the announcement. The stock market surged today closing up 497 points! I have learned not to get too excited about the stock market though. Wall Street seems to have a knee jerk reaction to almost everything lately. Remember last month when the Treasury Secretary Timothy Geithner announced the outline of this same program and the market went down 380 points immediately. Isn’t this the same plan? So the market did not like what he said so it dropped like a rock.

Now they like what is being said and it goes up 500 points. Nothing has actually happened yet…it is all just promised so far. I think the market should actually move based on actual results not promises.

Anyway…I like the idea and like I have said before the government is making some good moves, but these things will take time to trickle through the system. So if the stock market goes down 500 points tomorrow, don’t say that the plan isn’t working. Give it time.The recent changes in the market should help interest rates stay low and possibly even make them drop even further so if you had been thinking about buying a home or refinancing you may be pleasantly surprised.

For more info on this plan check out http://finance.yahoo.com/news/Stocks-surge-on-bank-plan-apf-14721874.html

For a refinance or a purchase loan check out http://www.thebriteway.com/.

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