Wednesday, April 02, 2008

Don't Say You Didn't Get Anything From the Bailout

by Tom Bozzo

Here's another update to a recent post, in which I sought to figure out what was in the recent efforts by out monetary policymakers to deal with the housing troubles for me — relatively responsible borrower who still (probably) has a fair amount of home equity. Initially, the answer seemed to be Sod All, but that's changed a little, as you can see from the updated graph:

More helicopter, Ben!

I've shown the FRB announcements of the Term Securities Lending Facility and of the approval of the BSC/JPMorgan Chase deal. Particularly after the latter, the 30-year rates (on a zero-point cash-out refi with 80% LTV) appear to have dropped around 37.5 bp from the previous range; let's call the sustained drop for someone who can afford a 15-year amortization 25 bp. So there's a little something for Main Street, though these rates aren't near the historic lows that are sometimes credited as a "fundamental" factor behind the house price run-up (in my not-so-extended family, there's at least one 15-year mortgage where the first digit of the rate is a 4).

Whether this will turn out to be worth more to the public than MBS losses flowing through the Fed to the Treasury remains to be seen.

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