Wow! What a day... keeping up with the financial markets and the craziness this week.
So here is my assessment, of Paulson and Bernanke's Plan (oh and that guy that McCain would fire)... (if you have time--I highly recommend following the links--please don't take my assessment as anything other than my $0.02...I think this is what is going to play out over the next couple weeks)
1. Treasury assess that there is a crisis, T-Bills fall below zero, credit markets freeze, and Treasury, Fed, SEC start pushing through Bill to make thing "right".
2. Once bill passes...Fed prints the money
3. Treasury/Fed reverse auction and buys lowest selling mortgages with the money, or does whatever the Treasury sees fit to do with it.
4. Wall street gets flush with cash from selling mortgages to US Government, more liquidity occurs in the market.
5. 3mo T-Bill rate stays above zero and Banks continue to lend to one another, and companies that are carrying too much debt live to see another day
6. Wall Street makes killer bonuses in 2010...again.
7. US Government saddled with the mortgages, and we'll see if China or Japan wants to buy some.
8. Spin the Wheel of Fortune
Notice I didn't touch on the consumer, or the homeowner...why?.you may ask...because that is secondary to the proposal...this seems to me to be all about Washington and Wall St. Not that it is a bad thing, but it does seem a little rushed. The panic that occurred Wednesday that pushed the T-Bill into negative territory did not last long... people are irrational but they learn from mistakes (sometimes). I do think there is a real concern of stagflation in this market. But, what do I know. I'm just a software guy. At the same time... I see real opportunities globally utilizing the Internet (who doesn't!).
One last point, I think this may be a great political move for Paulson. I think it could give legs to his blueprint for regulatory reform, which I think looks pretty good from the Insurance after just reading the exec summary.
Everybody calm down, and be honest with one another, and get along, and all will be fine!
I'm surprised there was uptick in companies with no debt.