Last week was complete with dramatic events unfolding that suggested that the financial markets could be completely unraveling.  The top culprits were the two huge GSE’s (Fannie and Freddie) and of course Indy Mac.  Well the gubmint is going to rescue Fannie and Freddie and they took over Indymac but who is next?  I mean, how much money does the fed have?  The FDIC reportedly has $53 billion set aside and they figure in a best case that Indymac will suck up $4 to $8 billion.  As to the GSE’s, the investment community has apparently completely lost confidence manifested by the precipitous drop in their share price.  Sunday, as was widely reported, the Treasury announced that it would lend to them as it “became necessary”.  Good ole Hank is also asking for Congress to quickly approve a plan to extend its line of credit to the two companies and to make an equity investment in the companies, of course, if necessary.  Fannie and Freddie own or guarantee about half of the $12 trillion in mortgage debt in the country.  These mortgages are always the best deals because of the fact that they are federally guaranteed.  The gubmint would step in cover the debt if the financial markets couldn’t.  You can imagine if mortgages were priced without this guarantee what that could do to available credit and what price they would be offered at.  Very few banks would put their assets at risk for all but the lowest of loan to values and would offer credit to only the most credit worthy if they couldn’t flog the closed loans off to some Fannie/Freddie conduit.

Should be an interest week - Tuesday we have retail sales, Wednesday - industrial production and consumer price index and on Thursday - housing starts and jobless claims.  Stay informed - call us anytime of the day or evening - we always have the best interest rates and of course - no one has better service.  Hey at Bayside, we’re not bankers - you can always get us on the phone.  Try it - couldn’t hurt, right?