Industry NewsMarkets & Economy

Wall Street shakeout clouds housing picture

Lower rates could be boon if economy doesn't falter
Published on Sep 15, 2008

Turmoil on Wall Street could mean lower interest rates for home buyers, but any benefit for housing markets could be outweighed by higher unemployment and a prolonged recession if the credit crunch becomes an even greater drag on the economy. Lehman Brothers Holdings Inc. today filed for Chapter 11 bankruptcy protection, and Bank of America announced a $50 billion deal to acquire another troubled investment bank, Merrill Lynch. Giant insurer American International Group Inc., which reportedly needs to raise up to $40 billion in capital to avoid a downgrade from credit-rating agencies, reached a deal with New York regulators to raise about half of that amount from its subsidiaries. As a whole, the day's news prompted a "flight to quality" by investors away from stocks and other risky investments into safer investments like bonds, pushing down long-term interest rates such as fixed-rate mortgages. Short-term rates soared, however, as banks became more reluctant to ...

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