Plunge Protection Team organizes government bailout for banks and subprime borrowers
We all knew this was coming unfortunately. Once the DOW cracked 13,000 on the downside, the PPT had to act and act they have.
From the Wall Street Journal (subscription required):
The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.
Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.
I'm curious as to who is going to pay the difference between the now-locked teaser rate on these loans and the actual interest rate that the holders of these loans is expecting to receive. I have a bad feeling it's going to be paid by us.
