Financial Change is Coming

More changes to Personal Finance rules will occur during the first 100 days of the Obama Administation than any other time in our countries history. The governmental entities that impact personal finance rules: Federal Reserve, Treasury Department, House of Representatives, Senate, and the President.

This week was very busy and events are unfolding that will impact your future. Here are some of the highlights:

1. Federal Reserve: Their big announcement was to buy long term treasury bonds to lower long term interest rates. The intent is to lower mortgage rates with a goal of having a 30 year mortgage rate of 4.0%, a rate not seen since the 1950 - 1960 era. This is done to stimulate the economy by having people refinance their home and have more spending money as well as to encourage people to purchase a new home. What does this mean: Get ready to refinance and use the savings to shorten the length of the loan rather than spend it.

2. Treasury Department: Yes we have a tax challenged Treasury Secretary. It is beyond me how someone this smart can somehow forget to pay taxes and then get special treatment by the government. Treasury has $350 Billion to spend, the other half of TARP. This will be used to help the banks get undesirable assets off of the books in some fashion and this helps the bank loan more money. This also helps to lower mortgage rates as it should reduce the spread between the long term treasury rate and the mortgage rate.

3. House of Representatives: The Democrats literally ignored every Republican request and passed a Democratic only designed $819 Billion Spending bill. For some reason the Republlicans were upset and voted against it. This bill significantly increases government spending and will provide growth to the economy. The auto industry is working to have people buy new cars where people will get a tax deduction for buying a new car. One option is a program called cash for clunkers.

4. Senate: It is their turn on the spending bill. The bill gets modified somewhat because of a higher ratio of Republicans and eventually something will get passed. It will be good to see what happens.

5. President: Is talking bipartisanship and actions say that his agenda is the only game in town. What is not in the news is the health care agenda and other campaign promises. Franklin Roosevelt would certainly be proud.

What does this mean for us? Get ready to refinance your mortgage. Make no major purchases in the near term as the government will be giving incentives on cars and other major purchases. The economy will grow with $1.2 Billion going into the economy with an emphasis on new autos and homes. The stock market will rise as the economy grows.