These plans are as optimistic as TARP, with the Federal Reserve Bank offering as much as $200 billion to purchase securities backed by consumer debt (credit cards, auto loans, student loans, etc.).  The Treasury will then insure up to $20 billion against losses (is this confusing yet?) and then the Federal Reserve will purchase up to another $500 billion in mortgage backed securities from Fannie Mae, Freddie Mac and Ginnie Mae (lets call them the three stooges).  As if that’s not enough, the Fed will also buy another $100 billion in direct debt issued by those firms.  And that’s it for Tuesday.

The best part – this time the Fed has a plan for where the money is coming from – the fed is going to make it from thin air increase their reserves.  Added to the other $700+ billion back in October, and now we’re talking about a lot of money, and from this seat nothing seems to have changed.  Obviously, as the country prints more money to increase their reserves they reduce the value of the American dollar world-wide, ultimately reducing the value of our exports and increasing the cost of our imports – not good for a country in recession.  How this plays out with the rest of the world experiencing similar problems and similar bailouts is yet to be seen, but considering this is really what can be called a credit starved recession it’s unlikely to see how the heavily indebted United States will come out of this without significant long-term issues.

The hope and potential upside here is that the Federal Reserve’s action will significantly improve the residential housing market, improving consumer confidence, improving asset values for banks, and hopefully promoting consumer spending through the purchase, construction, improvement and redecorating that comes with home ownership.  If it doesn’t, it will just be one more thing that the government tried, which like it or not is probably preventing a full-on global depression at a scale unlike anything we’ve ever seen before.

Obviously, I am hopeful for the best here and believe that at some point the banks, consumers, and small businesses that drive our economy are going to have to stabilize and eventually grow.  There will be a considerable amount of time between that growth and where we are today, but even a moderate stabilization would do wonders for consumer confidence, global confidence, and the American dream.

Ranter

During this November 26 through January 9th morratoreum, both government controlled mortgage servicers will work to implement a new loan modification program that should allow them to significantly increase the number of loans that they will be able to work through.

“Freddie Mac is on track to help three out of every five troubled borrowers with Freddie-Mac-owned loans avoid foreclosure this year,” David M. Moffett, Freddie Mac Chief Executive Officer, said in a statement. “Today’s announcement … provides a new measure of certainty to many of these families during the holidays.”

The only addition that I would add to this is the obvious – what about the people that are on the brink of foreclosure and nto yet three months past due.  According to this plan they’ll still get foreclosed on starting again January 10.  Merry Christmas.

Ranter