Subprime Solution?
Treasury Secretary Henry Paulson has announced that a plan is in the works to relieve homeowners who are trapped in the subprime fallout and who are in jeopardy of losing their homes to foreclosure. Each month, roughly 100,000 people’s interest rates on their subprime loans reset from the initial rate to a much higher one, which is causing foreclosures across the country, and driving down, not only the US markets, but is also having an effect around the world.
Paulson’s plan is to work out a deal between banks, lenders, and securities companies to draw out the initial rate for several more years, and allowing local and state governments to slide on bond taxes in order to help the homeowners. If nothing is done, the subprime disaster has the ability to go on and on sucking the life out of the markets, driving the dollar down further, and leaving people with bad credit and no homes. Bloomberg has the article here.
As far as the markets are concerned, although there have been losses, especially in the financial sector recently, there as still plenty of bulls out there, and the markets aren’t ready to turn yet. Last week’s buying was a sign that, while things are far from perfect, it’s far from time to liquidate all holdings and bury the cash in the backyard. Depending on whom you talk to, it could be a perfect opportunity to buy.
