The Fed worked overtime this weekend

The Federal Reserve took extraordinary steps this weekend to stabilize the credit markets.  The first Blockbuster move was that it facilitated J.P. Morgan Chase'sacquisition of the Giant Wall Street investment bank Bear Stearns for $2/Share(!?!)  Makes me wonder what we don't know. . .  Now, I'm for free markets, and normally against government involvement in private enterprise, but this feels different.  If  Bear Stearns went belly up and defaulted on its obligations, it would cause panic across Wall Street and further freezing of the credit markets, which could have a cascading effect reminiscent of the 1930s.  I think the fed did well.  They're on top of the situation, creative, and decisive.  This should instill confidence in the markets, helping to stabilize the situation.

The other major move on Sunday was the Fed's lowering of it's discount window interest rate to 3.25%, and the introduction of a new lending facility utilizing that rate which includes "non-bank" financial institutions, and allows mortgage instruments as collateral.  So what's all this mean?  It means that mortgage companies will be able to get unsold mortgages off their books, free up cash, and make more loans.  We'll see more "Jumbo" loans available at reasonable rates and we'll also probably see some guideline exceptions here and there.  Hopefully, we should see lower rates on both conforming and non-conforming mortgages resulting from a renewed confidence in the mortgage market.

Well, the Fed's on the situation, and it should be another interesting week on Wall Street.