Right now, with people still talking about the five year mortgage rate freeze, recession talk is looming. While the Bush Administration and others insist that the mortgage rate freeze will give us an “economic soft landing,” others aren’t so sure. MarketWatch’s Paul B. Farrell points this out about the whole mess:

What are they still smoking? Reminds me of Viking King Canute sitting on his throne at the shore commanding the tide to stop. Folks, tides and recessions come and go. And wishful-thinking, fairy-tale solutions won’t stop the inevitable, any more than proclaiming this plan will “ease the damage of the recession,” but it’s “not a bailout, nor a silver bullet.”

The fact of the matter is that a recession is coming. There are some things you can do to protect yourself from a recession, but for the economy, it’s coming. And, to tell the truth, the “not a bailout” is really for Wall Street.

There was a time when investors realized that shaky investments (like iffy debt on junk subprime mortgages) meant more risk. Now, though, the government is ready to bail out Wall Street investors as the risk catches up to them. And the mortgage lenders are getting help as well. They may have hemmed and hawed about how they wanted a short mortgage freeze timeframe, but the main thing is that they have managed to forestall foreclosure on loans they shouldn’t have made in the first place, ensuring that for at least five more years the money will keep rolling in. Farrell makes this point:

It’s almost funny. Supply-siders pretend to trust the free market to work out problems. Yet the elite of the conservative free-market supply-siders on Wall Street, at the Federal Reserve and (except for the Veep) in the White House, pushed for and got government intervention to minimize mortgage credit losses created by Wall Street’s excessive greed.

Tags: mortgage rate, mortgage rate freeze, home mortgage loan, recession,
Wall Street bailout, subprime loans, mortgage recession

Another Fed rate cut is in the works. Most analysts and Fed watchers expect another rate cut tomorrow at the Fed meeting. The only real point of contention at this point is whether it will be a 25 basis point cut or a cut of 50 basis points. Global credit markets, and notably the U.S. credit market, has been in a bit of a freeze since the subprime lending crash last summer. Newsday reports on the fears associated with credit market issues:

Although there is no solid evidence yet that consumer or business spending has been affected by a freeze in global credit markets, “financial conditions … are signaling a slowdown, and a potentially meaningful one,” Robert V. DiClemente, chief economist at Citigroup Global Markets, said in an interview. “If financial conditions are tight and unsettled, it’s something like someone messing with the plumbing in a house … people don’t transact and intermediate properly, and you bring a whole lot of activity into question.”

The Fed rate cut will mainly affect the rate at which banks lend money to each other. But this also has effects on mortgage rates, credit card rates and other financial transactions. The stock market is one of these other financial markets; a Fed rate cut is expected to inject confidence into the market. Indeed, as First Business reports, the Fed rate cut is likely to affect even the most ordinary among us.

Tags: Fed rate cut, global credit markets, home mortgage loan, mortgage blog,
subprime lending, mortgage rates, U.S. credit market

Despite all the hoopla about investor confidence returning on the back of the new mortgage rate freeze, many feel that a recession is coming. And that means that you need to start making sure that your financial house is in order. MarketWatch is offering some great ideas to help you get through the recession:

1. Emergency fund. MarketWatch points out that the best emergency fund will get you through three to six months. That can seem like a daunting task to many. I can’t just put three months’ worth of salary aside right now. What MarketWatch doesn’t say is that you can build this up gradually. Put aside what you can, and keep adding to it. Even some emergency fund is better than no emergency fund.
2. Blue-chip stock funds. When a recession is coming, it is important to make sure your investments are solid. Blue-chips may not offer sexy returns, but they generally do offer returns, no matter how modest. And when the wild ride is over, if you invest now, while the market is down, you will be happier later.
3. Get out of debt. Try to pay down your debt. MarketWatch points out that building credit card balances, especially from holiday debt, can really start to eat into your finances. I recommend aggressive debt reduction, in which you do what you can to get out of debt as fast as possible.
4. Get help from a financial adviser. MarketWatch recommends this especially if you are close to retirement. But it doesn’t hurt anyone to sit down and talk with someone who can help you map out your future and your asset allocation. But try to find a fee-based adviser — someone who charges hourly, and doesn’t get commissions for recommending certain investments.

No one wants to say it, but there is a recession on. And this means that you have to be extra-careful to guard your financial viability.

Tags: tips recession, mortgage rate freeze, home mortgage loan, stock funds,
investing, get out of debt, aggressive debt reduction