The FOMC (Federal Open Market Committee) announced today that they are buying back $300 billion worth of long term Treasury securities. So what does that mean for you and me?
It is a move that will have the effect of pushing down long-term interest rates that will hopefully start a refinancing wave.
As interest rates go lower, homeowners who have equity in their home may have the opportunity to refinance and lower their monthly cost. This move would hopefully help prevent further foreclosures…and further loan write downs on bank balance sheets.
For those homeowners who do not have equity in their homes, and can’t make their current payments, a loan modification would be their only alternative.
What do you think this plan will mean for bank stocks both short-term and long-term? I own Wells Fargo. Thanks in advance.
Bank stocks, like any stocks, will ultimately rise and fall with earnings. If the fed’s programs help banks get bad debt off their books and start making good loans at a profit, than the finanical sector should improve. However, an individual stock’s success, like Wells Fargo, will depend on the decisions that bank makes, so even if the sector benefits from the fed’s decisions, it doesn’t guarantee that stock will do well.