Word: bailouts
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...chain of events over the weekend went something like this: Efforts to find a buyer for struggling Lehman Bros. collapsed in the face of government resistance to any kind of bailout and the refusal of all potential purchasers (UK-based Barclays was reportedly the one that came closest to making an offer) to sign a deal without government backing. With Lehman headed for bankruptcy, Merrill Lynch was the next- most-vulnerable-looking Wall Street firm, so its CEO, John Thain, quickly inked a $29 a share sale to Bank of America that values Merrill at $50 billion. Meanwhile, AIG asked...
Fannie and Freddie are--childish names and all--by far the biggest financial institutions ever taken over by the U.S. government. Their bailout amounts to a stunning return to government control over the U.S. financial system, incongruously led by a former Wall Street boss (Paulson) working in what is purportedly a conservative Republican Administration...
...will this bailout affect my mortgage? It shouldn't affect existing loans at all. But Treasury's guarantee of Frannie's debts has already brought down rates on new mortgages because worries about the companies' future had been driving up rates. Two days after the takeover, the average rate on a 30-year fixed mortgage was down to 5.79%, from an average of 6.55% the week before, according to Bankrate.com As part of the takeover, Treasury announced that it will begin buying mortgage-backed securities--starting with about $5 billion in purchases in the next month. By making more money...
...experience is instructive: the cost estimates started low (Ely's first guess was $25 billion), then eventually grew to $500 billion. The actual price tag, as calculated by the Federal Deposit Insurance Corp. (FDIC) long after the fact: $123.8 billion, or about 2% of annual GDP during the bailout years. That's equivalent to $286 billion today...
...President George W. Bush in December that included language paving the way for the loan guarantees. "We are encouraging Congress to take this up now," says John Bozzella, vice president of external affairs and public policy for Chrysler. Auto company spokespeople insist that they're not asking for a bailout. "These are direct loans that we have to pay back," explains Ford spokesman Mike Moran. "Direct loans to automakers and suppliers will support American workers and strengthen the future of U.S. manufacturing and the economy. Borrowing capital at a lower cost than the double-digit interest rates...