Momentum Grows for Washington Bail Out for MBS

Implications: Holders of mortgage-backed securities and subprime mortgage lenders, such as Countrywide, holding loans in portfolio are likely to benefit from Government "solutions" to the subprime mess. 

Analysis: Political pressure is growing on the Administration and Congress to "do something" to help subprime homeowners who are facing possible foreclosure as mortgage loans re-set.  However, the likely solutions will also, by necessity, also bail out holders of subprime mortgage backed securities.  Countrywide and other mortgage lenders who hold significant loans in portfolio will also benefit.  The proposed FHA legislation already demonstates that the Congress is prepared to shift the credit risks to the Government in the name of helping homeowners.