Wishing Upon The Fed

It could get worse before it gets better in the mortgage money pits. Boston Fed President Eric Rosengren is encouraging banks in his region to do all they can to salvage subprime loans they’re carrying that aren’t yet delinquent. He believes the banking system should use rules already in place to address the problem, and does not advocate bailing out banks in trouble.

Extending terms or refinancing are options already available to lenders, but a modernization of the Federal Housing Administration (FHA) wouldn’t hurt.

Some are hoping the Federal Reserve will step in this month and reduce interest rates again to staunch the losses. Many interpreted Fed Head Ben Bernanke’s comments last week to “act as needed” as sufficient rationale to anticipate lower rates by Christmas.

So with special apology to lyricist Ned Washington, we offer this wistful version of the 1940’s hit from the movie, “Pinnochio:”

When you wish upon The Fed,
Makes no difference what Ben said;
Anything the market wants can come to you…

If your stocks have turned to steam…
No request is too extreme,
When you wish upon the Fed, as dreamers do.

(Fate is kind…
She brings to those in hock
The sweet redemption of their lagging earnings.)

Like a bolt out of the blue,
The Fed steps in and sees you thru.
When you wish upon The Fed,
your dreams come true.