The Government Plan Will Work

Accoding to Kevin Budde, Assistant Vice-President of Countrywide, The government's steps will help the economy. They are pumping liquidity into the credit markets, keeping the businesses' doors open allowing them to make payrolls and setting a floor under housing. It seems it can't happen fast enough for the scared buyers.

Here's how I expect the situation to unfold. In a few weeks the Treasury's plan will start up. The government will begin buying up the bank's toxic debt, getting it off their books. The debt will be sold later hopefully at a profit paying back some of the national debt.

By Thanksgiving it will be clear how it's working. This process is known as reverse auctions. If these reverse auctions aren't enough to get the banks lending again, the Treasury will implement their second phase of buying bank's shares to provide the liquidity needed to keep the wheels turning.

By year-end, the credit markets should be functioning better. Commercial paper will be moving again. Long-term lending, corporate bonds will start picking up. It will take more months to return to normal however. The measures taken by the Federal Reserve, Treasury Department and central bankers around the world will avoid the feared major economic downturn.

The New York Times ran an article this morning with an interview of Warren Buffet. Mr. Buffet said he has begun buying U.S. stocks in his personal account which prior to yesterday did not contain stocks, only bonds. He stated he has a minimum one year window time frame. The record shows Mr. Buffet has only stated this previously twice since 1972 and he was 3 to 6 months early. His philosophy is sell when everyone is greedy and buy when everyone is fearful.

The fourth quarter of this year and the first quarter of next year will remain difficult times for both the stock market and the housing industry. However, in January the lending process will be showing the steps being taken now are working and come Spring of 2009 sales of existing homes will begin a steady and consistent increase in volume as the fear diminishes. It can't seem to happen fast enough with what we have been through and are currently experiencing. January will begin my 34th year in the mortgage lending industry.

There is a light at the end of the tunnel and I am anticipating many good years to come. I wanted to share a little insight. I hope it help clarify things. Thank you. Kevin Kevin BuddeAssistant Vice-PresidentPrivate Client GroupCountrywide Bank, FSB