WHERE ARE WE GOING, AND WHY AM IN IN THIS HANDBASKET

Well.  If you haven’t turned on the television or the radio or read a newspaper in the past 24 hours, let me be the harbinger of bad news: we had the biggest point drop in the Dow Jones Industrial Average yesterday.  Why this massive stock crash, you may ask?  Not because something catastrophic hap­pened.  It is because something Wall Street perceived as helpful DIDN’T happen.

The 700 billion dollar Wall Street bailout plan got shot down by the House of Representatives yester­day, brutalizing the market in it’s aftermath.  While this does save a ton of taxpayer money, it also presses more banks to the brink of insolvency.  We just saw Wachovia get gobbled up Pac-Man style by CitiBank, and many people are wondering whish bank will be next to fall.  As such, investors are afraid of investing, pulling a ton of capital out of the markets.

The super-terrible part about it is that mortgage rates hardly benefitted from the flight from risk.  Part of the bailout was aimed at buying up mortgage-backed securities, which would have instilled a re­newed confidence in the investment vehicle and would have driven rates down.  With no bailout, peo­ple are back to treating mortgage-backed securities like active grenades.  This means we can expect higher rates until some iteration of this bailout gets through Congress.

Thursday is the tentative date for a second attempt for Congress to pass the bailout bill.  In the mean-time, it is expected that many more Democratic leaning provisions and earmarks will be added to the bill (because the Democrats have a majority in the House of Representatives).

Maybe we can jump on a floating door and start paddling to Cuba.

By Greg Whiteside, certified mortgage planning specialist and licensed mortgage broker.

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