DEAL OR NO DEAL?

DEAL OR NO DEAL? It appears a deal has indeed been struck, as Congressional leaders and the Bush administration announced they had come to an agreement to spend up to $700 Billion on the historic Bailout Plan.
But first - a look back at the past week, leading up to the weekend announcements.
There were several major developments, beginning with the announcement that Japan's Mitsubishi Financial Bank will purchase 10% to 20% of Morgan Stanley, saving the company from the same bankruptcy fate as Lehman Brothers. On Wednesday, the financial markets received another vote of confidence with word that billionaire investor Warren Buffett's Berkshire Hathaway is investing $5 Billion into Goldman Sachs. But then on Thursday, Washington Mutual was seized by the federal government, and its assets were sold to JP Morgan Chase for $1.9 Billion. The fall of Washington Mutual represents the biggest US bank failure in history.
But perhaps the biggest news of the week began on Tuesday, as Fed Chairman Ben Bernanke and Treasury Secretary Henry Paulson began their testimony in front of the Senate Banking Committee on the $700 Billion rescue plan proposed by President Bush.
The plan calls for taking illiquid mortgage backed securities off the hands of lending institutions, and through the week several elements of the plan were intensely debated, including the amount of the plan, the government's role, the absence of oversight, and limits on pay for executives of bailed-out financial institutions. And while full details are still pending, it appears that an agreement has been reached, with the intent to revive our financial system and avoid negative far reaching effects to the rest of our economy.
Despite all the historic events of the week, home loan rates ended the week only around .125 percent worse than where they began. I will continue to monitor this situation closely in the days and weeks ahead, and keep you informed.
IN THE MIDST OF ALL THE HISTORIC HAPPENINGS...DON'T FORGET THAT FLU SEASON IS STEADILY APPROACHING. CHECK OUT THIS WEEK'S MORTGAGE MARKET VIEW FOR PRACTICAL TIPS YOU CAN USE TO AVOID COLDS AND THE FLU!



Forecast for the Week




Besides the details that will be coming on the financial rescue plan, several important reports bookend this week. We begin the week with the Fed's favorite gauge of inflation as the Core PCE (Personal Consumption Expenditure) data will be released on Monday.
Then, definitely stay tuned for the Department of Labor's big Jobs Report scheduled for Friday, which will show the number of jobs lost or gained in September. The Department of Labor averages their numbers, and part of each month's report includes "revisions" to the several prior months' numbers. A positive report could be good news for Stocks, but bad news for Bonds and home loan rates. It will be important to see how much of an impact the recent turmoil has had on the job market.
Remember when Bond prices move higher, home loan rates move lower...and vice versa. As you can see in the chart below, Bonds and home loan rates have not worsened substantially, despite the uncertainty surrounding the Bailout Plan and the financial markets in general. I will be watching closely to see how Bonds and home loan rates respond to all the historic news that will be coming in the week ahead.