March 23, 2009
March 23, 2009 by admin
The stock market moved up sharply in early trading on Monday. The government has supplied more details on their plan to combine private and public capital to help remove toxic assets from banks balance sheets. This move, which is seen as critical component to helping restore lending and bring the credit markets around is being viewed as mostly positive by the lending and investing communities.
The stock market has rallied well past the 7000 point level as investors in banks and finance companies appear to believe they have turned the corner for their business lows and more prosperous times will soon appear. Citigroup and Bank of America have both seen their stock prices double up over the past two weeks and have been amongst the hardest hurt following the collapse of the stock market.
The announcements from the government today will collectively use the tarp to help incentive private investment firms to purchase assets from banks and lenders. This new phase will be called a collaborative Public-Private Investment program and has earmarked over 500 Billion dollars for an initial investment with the potential to exceed one trillion dollars. The hope is that the combined efforts will help in establishing a fair value for these assets and also help banks in determing their asset values as they work to clean up their books and comply with mark to market accounting rules. The mark to market accounting rules have been extremely challenging for the banks and investment firms as they have struggled to identify the true value of their assets and have continued to increase their required capital as these values have diminished. This has been one of the major factors as to why banks have had to borrow money from the government their tier one, two and three core capital ratios have been greatly influenced by the toxic assets and the mark to market accounting rules.
The housing industry today released details on existing home sales for the month of February. The market saw home sales move up over five percent as buyers are purchasing homes at deep discounts and foreclosures and bank owned properties continue to be a growing component of housing sales. The housing market could get some additional help from news out of the fed last week. Long term fixed mortgage rates received a nice boost last week from the FOMC and are now hovering in the high four percent range with points on thirty year loan terms.