Are They Serious? Fed Takes Mortgage Debt as Collateral, Bear Stearns Gets Bailout, and President Bush is Confident in the Economy!


This week has been an extremely volatile one in the world of real estate and the economy. We’ve seen Gold at $1,000 an ounce, a collapsing dollar, oil skyrocketing, an much more. Of everything that has happened, probably the most shocking is what came out of the Fed this week . . .

According to the The Daily Telegraph, “The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis.” Tim Bond, a strategist at Barclays Capital remarked, “The market was starting to question the solvency of bodies that stand at the top of the credit pile. These agencies together wrap or insure $6 trillion of mortgages. They cannot be allowed to fail because it would cause a financial disaster. The fact that this sector has blown up has caught everybody’s attention in Washington”

At Least President Bush is Confident in the Economy!

bush_stupid.jpgIt seems like everybody but the President, who continued to dodge questions about the economy until a press conference today where he expressed his “confidence” in the US economy. I’m glad that he is confident, but he’s doing little to stem the collapse of the dollar and the looming current recession.

To make matters worse, suffering investment bank Bear Stearns today was given a bailout by J.P. Morgan Chase and the Federal Reserve Bank of New York. From the Wall Street Journal:

The intervention by J.P. Morgan and the New York Fed shows Bear “didn’t have enough money to turn the lights on this morning,” said Carl Lantz, strategist at Credit Suisse. “And in a big picture sense, this isn’t that comforting.”

This news turned a somewhat positive market (inflation report wasn’t as bad as expected) upside down once again, and at the time of publishing this post, the Dow is down 300 points and Bear Stearns is off 40%.

Talk about an economy we should be Confident in!

About Author

Joshua Dorkin

Joshua Dorkin (@jrdorkin, Google+) founded when he saw a need for free, trustworthy information about real estate investing online. Over the past 12 years, Josh has grown the site from self-funded hobby to full-time job and passion. Today, BiggerPockets brings together over 600,000 members, housing the world’s largest library of real estate content, iTunes’ #1 real estate podcast, and an array of analysis tools, all geared toward helping users succeed.


  1. Bush is in a difficult spot and has no choice but to put on an optimistic face. He can’t come out and say the economy has gone from being in the toilet to being in the cesspool. The scary part is that it is probably going to get worse….a lot worse. The Fed is going to do anything that they can to ward off a total meltdown of the credit markets. The only thing that is saving us is that our economy is too big to fail simply because the rest of the world needs us. When something like this happens in a third world country the government usually collapses and all hell breaks loose. Make no mistake, we are teetering on the brink of the biggest economic crisis since the great depression. Brace yourself for a stagnant economy coupled with severe inflation, otherwise known as stagflation. This could get really, really ugly.

  2. Pingback: Are They Serious? Fed Takes Mortgage Debt as Collateral, Bear Stearns Gets Bailout, and President Bush is Confident in the Economy! | The Long List of Odysseus Medal Nominees | Realtors and real estate, mortgages, lending, investments

  3. Oh, boy! And those of us in other countries wonder how we looked to the US for economic leadership.

    Anyway, what do you think of Rehab702’s concerns? Can it ever come to that….a 1929 situation?

  4. An Old World Order!
    Today’s Fed actions led me to further think about the current state of our economic system. I have gone over in my mind numerous time about one fundamental question. Under what kind of system are we living? Is it Capitalism, Totalitarianism, Fascism, Communism or Socialism? Today’s action provides the most direct evidence that our system has devolved back to FEUDALISM, or FEDALISM as it could be more aptly called today. This remarkable act of bailing out one investment bank so that their derivatives wouldn’t have to be marked to market proves the oligarchical nature of our society. The Lords of Wall Street are under the protectarate of the FEDal system. We the fifes must go about our daily lives and hand over increasingly large sums of our hard earned “money” to ensure the “stability of the markets”. What bonus should Mr. Schwartz receive from the taxpayers largesse? As the new Sheriff of Nottingham, Ben Bernanke, and his sidekick, Hank Paulson, go about their daily adventures in destruction of our savings by debasing our currency, we the fifes can only look upon these actions with disbelief. This is a supposed to be a democracy, yet all these decision take place behind closed door under dubious circumstances and have unknown future consequences. This has gone far enough. We should demand the immediate resignation of Ben Bernanke and Hank Paulson, and start having some transparency in our markets. These ridiculous anti-Capitalism, anti-competitive, anti-free market, Save our Crony friends at any cost policies MUST STOP! Robin Hood, where are you?

  5. Gregory Bain on

    Rehab 702 said, “Bush is in a difficult spot and has no choice but to put on an optimistic face. ” Who do you think put the country in this spot. You predictions of the future economic condition sounds like chicken little. There are only 310 days left for this administration.

  6. To Gregory Bain: it doesn’t matter who put us into this mess. The fact is that the President (whoever it is) has to put on an optimistic face whether he really believes it or not. My prediction has nothing to do with how many days Bush has in office. Things don’t magically change because we have a new President. My outlook for the future is based on things that I have seen before, if you were around to witness the stagflation of the late 1970s you know what I am talking about. I am actually optimistic for the long-term. Our economy has proven itself to be incredibly resilient. However there will be much pain as the current situation unwinds. Usually when the government steps in as they are doing now, they have a tendency to make things worse because of knee-jerk reactions to problems.

  7. Gregory Bain on

    It does matter WHO put us in this mess? The courts fill our prisons with scapegoats every day. Bush and his political party have placed us in harms way. They have been quick to point fingers and place blame on past administrations while feathering the nest of their cronies.

    I remember the 70’s very well, thank you. Nixon, Ford, and Carter replaced by the hands on guy Regan. Today everyone talks of Regan as if he were a hero. Bush’s daddy had it right – VOODOO Economics is what he called it then and what it is. Of course, being Vice President and President meant more to Bush than being right (to twist the words of Henry Clay).

    Economics can not be regulated like a water spigot. “The current situation” will unwind and some things will be different than what most of us has become use to as a standard of living. And, if we locked up those from the Nuremberg Trial and those on Enron; why not George? It does matter, how we got here.

  8. Gregory, I think you are misunderstanding my point. The fact is that we are in a mess. Playing the blame game will not fix it. I do believe that people need to be help accountable but that still doesn’t fix things. Any President has to remain optimistic in public, whether he’s guilty of any infractions or not. You certainly are not in the minority in your dislike of Bush, I’m no fan either. But the fact is that the problem will still be there when he is out of office. When we get though this, and we will, things will be different. Some things will be better and some worse, but they will be different.

  9. Gregory Bain on

    Well, yes. What you say is true. However, it makes me just a little anger when I see this bail out Bear Stearns and see the “retirement” package that the chairman of CountryWide got. This has been a well thought out rip off of the American people. First they get their lobbists to change the bankruptcy laws by wine and dine of Congress. Then they make a ton of money trading worthless paper on the backs of people who could not afford to own a home. The president makes speech after speech claiming the American Dream is being realized under “his watch.” And, NOW……

    How do you spell SCAM?

  10. Bush confident in the economy? he was confident that Saddam Hussein had WMD too! I’m really angry that this fool is going to affect my life and millions of others because of his crazy ideas. the sooner November comes the better for all of us!

  11. At least the banks are one st ahead this time (we hope). Pumping money into the economy WILL boost confidence and hopefully we’ll all get through this turbulent time without too much trouble.

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