Today the Federal government announced a rescue plan after a historic week in our financial markets. Earlier in the week Lehman Brothers declared bankruptcy, Merrill Lynch was sold, and AIG was bailed out by the government. Central banks from around the world poured hundreds of billions of dollars into the banking system in hopes to calm the storm. Despite the surge of news and volatility in the financial markets this week, mortgage rates had little change.
The rescue plan announced today by the Treasury spoke of a broad plan. A legislative proposal for lawmakers will be drafted by the Treasury this weekend. The plan will likely include help from the Treasury to banks who have illiquid mortgage assets. Buying the mortgage assets at a discount provides relief for the banks and will allow the government to provide help while forecasting a positive return.
Treasury Secretary Henry Paulson said, “I am convinced that this bold approach will cost American families far less than the alternative – a continuing series of financial institution failures and frozen credit markets unable to fund economic expansion.”
For more information about the Treasury’s announcement visit www.bloomberg.com.