Cleansing Loan Market Drops Rates

Summary


Three weeks ago, I wrote a column that was published the day after Thanksgiving. While citing some pretty bleak statistics, I included the message that all cycles eventually return to normalcy.

Since that column was published, mortgage-interest rates plunged. Part of the Treasury Department's $700 billion bailout plan includes the purchase of billions of dollars in bad loans owned by the two megamortgage giants Fannie Mae and Freddie Mac. Apparently, the government is going to be true to its word.

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Cleansing Loan Market Drops Rates

So why would the government's promise to buy a bunch of stinky loans cause mortgage rates to fall? The answer is easy.

Fannie...

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