except his conclusion. I think that 6% or a litlte over is about what the market would do if the government didn't act to keep mortgage rates down. I think the government will continue to act to keep rates down for the purpose of slowing the deterioration of real estate prices and the related deterioration of bank capital. My estimate (meaning guess) for the 30 yr mtg rate one year from now is 5%. I didn't vote because I'm torn between above or below 5%. I think they will continue to push rates under 5% but will have limited success. To keep banks profitable they will try to keep the yield curve from flattening by, among other things, continuing to keep fed funds and the discount rate near zero. I predict that in TARP III (coming to your neighborhood mega bank soon) Treasury will pay banks interest on the short term TARP money they borrow. Yes, I'm joking, but the crazy thing is that in some indirect sense it might happen. For example, maybe they will make taking (or not paying back) TARP money a condition to a seller's participation in the Toxic Asset auctions. Rate this comment: 0 0

by Anushka 04:35:57 AM 2012.11.03