Bailout Fundamental Math; S & L 101.

Savings and Loan 101: Banks attract customer deposits by offering a guaranteed rate of return on investment (usually a guaranteed rate and secure investment). So, the bank takes your money and says we'll give you....5% return on the money you're depositing for the next "X" months/years. The rate (percent) needs to be attractive for someone to put their money in the bank. That's the "savings" portion. Next is the "loan" portion, where a bank loans out the money you've invested to someone who agrees to pay the bank back, say, at 7% interest. So, the bank is basically "brokering" and earning the difference of the money invested at 5% and the money loaned at 7%, in this case, they're making 2% gross profit. Now, if there is no "carrot" for people to invest money, for example, an offering of a 2.5% return on a 6-month CD, then borrowers say; Screw it, I'm' better off with my money stuffed in my pillow; It feels safer there plus the rate of return isn't appealing at the bank. Next, the banks are loaning out money at something silly like 4.5%... so now the banks have no profit margin, plus loans are defaulting, and the whole thing turns to shit. The fundamentals of banking are being manipulated in a way that is us-sustainable as a business model and consumers have no confidence. It's deeper than this, but if you can get a loan in the 4%'s right now on 30-fixed, I'd recommend that you sack-up and do it. Do it now. It's the ONLY thing in your advantage in banking right now. www.ptre.net Pat Townsley Real Estate Network. 415-485-1776