Financial ETFs Wilt As Bailout Costs Racked Up

The cost of bailing out the auto industry and our financial institutions, many of which are major components in exchange traded funds (ETFs), is nearing $3.5 trillion. And that’s just the beginning.

Although Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke do not mention costs in their speeches, the tally is at $3.45 trillion and counting. The major signs down the road are higher interest rates and hyper inflation to offset the spending that is radically going on now, reports Aaron Task for Tech Ticker.

The “Hope for Homeowners” program is having trouble getting lenders to participate, causing a revamp of the program. The government may allow more borrowers to qualify for a $300 billion program designed to let troubled homeowners swap risky loans for more affordable ones, reports Alan Zibel for Associated Press.

Meanwhile, Paulson said the administration will continue to use $250 billion of the program to purchase stock in banks as a way to bolster their balance sheets and encourage them to resume more normal lending.

Dollars will not be spent rescuing troubled assets from banks as originally announced,as the new goal will focus on a program to support financial markets, which supply consumer credit in such areas as credit card debt, auto loans and student loans, reports Martin Crutsinger for Associated Press.

In England, the economy is set to shrink and inflation will plague the nation, but The Bank of England is trying to set a softer landing, with another rate cut.

It will cut interest rates even below their current half-century low, as the economy has already settled into recession mode and will most likely contract more in 2009, reports Sumeet Desai and Christina Fincher for Reuters.

Annual inflation, which is at 5.2%, would fall to just below 1% in two years, half the central bank’s target, it forecast a week after making a surprising 1.5% interest rate cut to 3%.

• iShares S&P Global Financials Sector Index Fund (IXG), down 52.9% year-to-date

• Financial Sector SPDR (XLF), down 52.7% year-to-date

Posted in Categories: Contributor, ETFs, External Research, Stocks, UK, USA.

Subscribe by RSS Subscribe by Email