Bush's Subprime Mortgage Freeze

You can find answeres on most of the tv networks such as: CNN, Fox, Blomberg etc.

Bush knows absolutely nothing about economics or finance in my opinion. His programs and statements are prepared by his staff he himself does no research on any matter of importance look at Iraq!!

The only people who are being hurt financialy are the people who fell victim to sub-prime loans and have put into their houses everything they had including dreams of a future. What a shame!

"Bushes" program proposes a 5 year "grace period" but in the 5 years the borrower will still have to pay the interest which in my opinion is grater the the principle return payment.

Check it out!

Hi,

If I understand you correctly, your opinion is that president Bush should just let the market adjust itself and not try to meddle in affairs he can't control?

Take care.

Absolutely right!!! Gov. interferance only disrupts market demand and supply. The big money makers will survive, the average american will go down the tube but will put up a good fight before doing so!!

It will cause "other" problems.

The main concern was that there would be main issuers and holders of bonds that would be wiped out by the issuer defaulting.

 Now usually, if a market is experiencing such trouble of extended credit, the correction is the defaulting and raising of interest rates (making it harder to obtain credit).  Credit is no longer cheap. So a "tightening" does occur.

How is this done?  Either the free market determines this market correction, or a centralized bank with a government that issues fiat money can change the overnight borrowing rate or use other methods.  This adjustment in the interest rate signals the rest of the market to react.

What the President has done:  he has interfered in the market and the money market responsibilities of the Federal Bank.  Basically, if the Fed wishes to "help" the market, any plan it has has been undermined.

Further, by "locking" the interest rate, the credit rating goes down, meaning more risk, not less.  This seems counter-intuitive, but think about it for a second.  There is currently more risk in having people borrow from you in most bond areas, so the part is to think about is for the same amount of risk, you go for the bond that has the higher interest rate.  So these are actually devalued bonds in comparison (you can get better interest elsewhere), and carry greater risk.  Who would want that as a lender?  And as a borrower, you are now considered a greater risk automatically.  What borrower wants that? 

So basically, outside of the main issues that the bloomberg article sites (which are true), what has just even more occured is the undermining of the free market and/or the central bank for the United States along with a devalued/greater risk mortgage bond market.

 Hope that helps.