What Affect (if any) does the Government Backing Bank Loans Have on The Consumer

What Affect Does the Bailout Have for You, The Consumer?
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I got a great question from a client today about what affect the announcements from the federal government agreeing to back all bank lending would have on the consumer. Here is the question and my answer.

Good Stuff!

What effect does today's announcements have in lending decisions?

Oct. 14 (Bloomberg) -- Citigroup Inc. and Goldman Sachs Group Inc. were among banks that soared in New York trading after the U.S. government said it would invest in nine of the country's biggest financial firms and guarantee debt they issue.

Shares of Morgan Stanley, Bank of America Corp., Merrill Lynch & Co. and Wells Fargo & Co. also climbed on the plan, in which the government will spend $125 billion to buy preferred stock in the companies.

....It's a good thing, it's what needs to happen, it will allow the markets to start functioning again,'' said Ralph Cole, a vice president for research at Ferguson Wellman Capital Management Inc. in Portland, Oregon, which oversees $2.7 billion including shares in JPMorgan, Wells Fargo and Goldman. ....We'll know if it's working when we see if overnight rates go down and banks start lending to each other.''

Citigroup, JPMorgan, Bank of America and Wells Fargo will each receive $25 billion, according to people familiar with the matter, while Morgan Stanley and Goldman will get $10 billion. Bank of New York Mellon Corp. will receive about $3 billion and State Street Corp. will get about $2 billion, the companies said today.

The investments are part of a $250 billion plan to put capital into U.S. financial institutions, which have been burdened by bad loans and rising borrowing costs.

Michael

Michael~

This announcement has to do more with money that banks lend each other on a national and international platform then us down at the consumer level.

Best,

Melinda Potcher

Mortgage Broker

Trinity Mortgage, LLC

(505) 259-6397 cell

(505) 214-LEND fax

melinda@trinitymtg.biz

http://www.homeloansalbuquerque.com

Currently listening : The Information By Beck Release date: 2006-10-03