Stocks Rally as Fed Unveils Plan to Relieve Banks of Toxic Assets
What an incredible day it was an on Wall Street today. The stock market gained 497 points in a one-day session. This jump came after the government released its latest plan to help the banks remove the toxic assets from their balance sheets. I do not understand the details 100% (yet), but I do get good idea of how this program works. The government is looking to the private sector to come together and invest in these assets (mostly houses) that have caused our banks so many problems. As far as I can understand, investors could purchase a $100,000 asset for $10,000 while the government would match your investment 100%. So therefore, if you were to put in $10,000 the government will put in another $10,000. The FDIC will finance the remaining balance. Furthermore, these loans will be all non-recourse. That means that you can not loose more than what you have invested. The idea is that when the asset/s are sold, the profits will be split 50% with government.
I personally like this idea very much (and so did Wall Street). There is no doubt in my mind that these assets will come back up in value. If I had the money right now, I would seriously consider investing in some of these assets. The United States is a country whose population is always growing. There will be a need for these houses in the future. As the population continues to expand, more people will get married, enter the workforce and therefore purchase homes.
Housing starts also showed that there was an increase home purchases this past month. 50% of those purchases were distressed properties. There will come a point when there is less and less distressed properties on the market. Once this happens, housing prices will start to stabilize and will start to rise again. The stabilization of the housing market will ultimately end the recession.
What an incredible day it was an on Wall Street today. The stock market gained 497 points in a one-day session. This jump came after the government released its latest plan to help the banks remove the toxic assets from their balance sheets. I do not understand the details 100% (yet), but I do get good idea of how this program works. The government is looking to the private sector to come together and invest in these assets (mostly houses) that have caused our banks so many problems. As far as I can understand, investors could purchase a $100,000 asset for $10,000 while the government would match your investment 100%. So therefore, if you were to put in $10,000 the government will put in another $10,000. The FDIC will finance the remaining balance. Furthermore, these loans will be all non-recourse. That means that you can not loose more than what you have invested. The idea is that when the asset/s are sold, the profits will be split 50% with government.
I personally like this idea very much (and so did Wall Street). There is no doubt in my mind that these assets will come back up in value. If I had the money right now, I would seriously consider investing in some of these assets. The United States is a country whose population is always growing. There will be a need for these houses in the future. As the population continues to expand, more people will get married, enter the workforce and therefore purchase homes.
Housing starts also showed that there was an increase home purchases this past month. 50% of those purchases were distressed properties. There will come a point when there is less and less distressed properties on the market. Once this happens, housing prices will start to stabilize and will start to rise again. The stabilization of the housing market will ultimately end the recession.
Labels: Bank of Internet, FDIC, stock rally, toxic assetts, Wall Street
Credit Card / Financial news blog post by Todd Holliday at 8:55 PM 