The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.
Emergency action was co-ordinated by Ben Bernanke [right], Donald Kohn [top], and Mark Carney after problems emerged
Read moreFed takes boldest action since the Depression to rescue US mortgage industry
Stocks surged, bonds fell and the long-suffering U.S. dollar soared in reaction to the moves, a sign financial markets saw the plan as a step in the right direction to ease a crisis that has threatened world economic growth. The Dow Jones industrials closed nearly 3.6 percent higher.
In the latest effort to ease a credit contraction that has disrupted global finance, the Fed, Bank of Canada, Bank of England, European Central Bank and Swiss National Bank announced a series of aggressive measures to boost liquidity. It was the second time in three months that central banks from around the globe had launched coordinated efforts.
Wall Street economists were quick to call the new lending facility a step in the right direction, but what’s most needed is time for the de-leveraging of billions of dollars in loans globally.
Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed’s unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive.
The name on most people’s lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank.
“The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn’t flush with cash and needed funds in a hurry,” Simon Maughan, an analyst with MF Global in London, said.
Read moreDespite the Federal Reserve’s efforts Wall Street fears a big US bank is in trouble
Over 900,000 borrowers are losing their homes, up 71% from a year ago, and a record number of home owners are behind on payments.
NEW YORK (CNNMoney.com) — More home owners than ever are losing the battle to make their monthly mortgage payments.
Over 900,000 households are in the foreclosure process, up 71% from a year ago, according to a survey by the Mortgage Bankers Association. That figure represents 2.04% of all mortgages, the highest rate in the report’s quarterly, 36-year history.
Another 381,000 households, or 0.83% of borrowers, saw the foreclosure process started during the quarter, which was also a record.
Additionally, the number of mortgage borrowers who were over 30 days late on a payment in the last three months of 2007 is at its highest rate since 1985.
“Boy, that was ugly,” said Jared Bernstein, an Economic Policy Institute economist of the data.
“It’s another reminder that anyone who thought we had hit bottom was wrong. This was a huge bubble, and when a bubble of this magnitude breaks, it creates a huge mess,” he said.” It could take a lot longer for the correction to work through the system.”
Housing rescue: What you need to know
One reason it may take so long is that there seems to be no end in sight for falling home prices.