An employee investigates and then rats out crooked colleagues at Countrywide Financial, is fired, but then the US Department of Labor orders the bank to rehire the employee and pay $1 million in penalties. No, this isn't a Julia Roberts/Abe Vigoda movie, this is all for real: JuicyScript.  

It's become an all-too-familiar phrase this year: "Mortgage rates post new record lows." (Stupidest narcastic comment running for 2011...!) But aside from that favorable happenstance, what other positive can be found on which to focus in the housing market? Delinquencies, foreclosures, underwater homeowners, borrowers with sub-par credentials and more have been a continuing story for years now, and there is little abatement in those areas. Even record low mortgage rates have limits in how much assistance they can offer, as most homeowners are no where near being able to refinance altogether let alone will those "lenders" even close a loan at that low low rate.

But we may see a new push to help long-term rates even lower in the weeks and months ahead. Whether or not it will do much good remains an open question.

The Federal Reserve conducts a two-day meeting this week to discuss what can be done to stimulate an economy which clearly needs some help. While the Fed might consider a new round of bond or mortgage-backed security buying, the beneficial effects of those programs ideas are believed to largely spent. Instead, two ideas which seem likely to get the most play are changing the mix of the duration of holdings on the Fed's balance sheet (called "Operation Twist"), which would see the Fed trading in maturing short-term bills and notes in favor of purchasing more longer-term bonds, and/or lowering the interest the Fed is paying banks to park excess funds with the Fed itself.

The concepts themselves are pretty simple. Changing the investment mix means that short-term rates (already near zero, and so hard to force lower) might increase slightly as the Fed purchases fewer of them, while long term rates might decline as the Fed willingly buys these bonds, which will tend to push their prices up and their yields down. Rather than compete against the Fed, this change might push investors to seek out higher yielding "risk" assets, taking money away from the safe haven of Treasuries and putting it to work it the private economy, which in turn might provide some boost to economic activity.

At the same time, lowering the yield banks are earning by keeping money parked and out of circulation might see banks instead pushing to lend or invest in elsewhere in the economy, which might make more money available for lending, and at possibly easier the terms for certain kinds of borrowers, most probably business borrowers.

How much benefit will come from this is a matter of speculation, but there is potential for it to boost GDP growth by a couple of tenths of a percent or so. Given the weak state of the economy -- presently hovering around a 1% GDP rate -- any boost would be welcome, but any new Fed program is certainly not a panacea for what ails the economy. Perhaps there are other ideas which may come to light when the Fed meeting ends on Wednesday, and more radical ideas may certainly be considered by the Committee, but these seem most likely to come at the moment.

Soooo the economic picture remains fairly dark, and the Fed will be doing... something with perhaps some benefit, but probably nothing immediate. Arguments in Washington over how much to spend and where on attempts to boost employment will continue, but even if the release whatever funds are made available came tomorrow, it will be a while before those effects kick in at the earliest. All of this argues for a continuation of the troubled period in which we have found ourselves for months now, with little relief in sight. That suggests that lower to largely stable mortgage rates are likely to persist, with occasional flares higher as bright spots appear (such as the agreement to lend money to Greek banks and forestalling defaults seen this week). It's hard to fully know what the Fed has up its sleeve or how investors will ultimately react, and that may come in to play as we go along.

This week, the focus will be on the Fed and the few housing-related indicators which are due. An improved stock market firmed up interest rates as the week came to an end, and that suggests that we'll see mortgage rates firm up a little bit next week, probably just enough to lift us off record lows. Of course, a wildcard in the forecast is the Fed; if something unexpected comes in the statement which will come on Wednesday, some additional volatility in either direction might occur.

Take heed......
When you drink Vodka over ice, it can give you kidney failure.
When you drink Rum over ice, it can give you liver failure.
When you drink Whiskey over ice, it can give you heart problems.
When you drink Gin over ice, it can give you brain problems.
Apparently, ice is really bad for you!