Washigton D.C. November 12th-

Hank Paulson's $700bn rescue plan to alleviate stress in financial markets is under scrutiny again as investors are patiently waiting for TARP money to reach its intended sources.

Yesterday Democratic leaders re-opened the debate surrounding US automakers entitlement to a piece of the $700bn rescue plan. In a NY Times article House majority leader Harry Reid cited that " Next week, during the lame-duck session of Congress, we are determined to pass legislation that will save the jobs of millions of workers whose livelihoods are on the line". This statement came after House Speaker Nancy Pelosi (pants wearer of the House) said Congress and the administration "must take immediate action" to stave off a possible collapse of the American auto industry.

Notice we are talking about TARP money being used for something besides MBS again? Word on the street is the rescue package will NOT be used to purchase whole loans. These excerpts from Neel Kashkari's statement at the SIFMA summit on TARP don't paint a friendly MBS picture (right now)

"This morning, I'd like to put a special emphasis on the Capital Purchase Program that Secretary Paulson announced 27 days ago on October 14."

"First, I will discuss Treasury's progress implementing the Capital Purchase Program. Second, I will review some of the important developments in procuring essential services for the program. Third, I will describe how we have built up the leadership of the Office of Financial Stability and note a few of our recent critical additions to our team. Fourth, I will give you a detailed update on our important continuing work to meet the highest compliance requirements. And finally, I will briefly discuss our next steps."

ANYWAY! (grumble grumble grumble) Treasury Secretary Hank Paulson will give US taxpayers an update on recent TARP developments at 10:30AM EST. You should be able to listen live via most major financial television media outlets, we expect most market participants to be intently focused on the Treasury department's strategy to fill the hands of the increasing number of hat in hand struggling financial institutions. If you would like to do some catching up of your own we recommend checking out the Treasury departments online Emergency Economic Stabilization Act website….. . We will post Hank's statement as soon as it is posted.

In some housing related news, yesterday the Federal Housing Finance Agency announced its plan to save the US real estate market. The program was unveiled in THIS statement. Here a few excerpts if you do not have the time to read the entire thing…

* "Stabilizing our financial system will require not only strengthening our financial institutions so they are able to lend to our communities, but also helping homeowners avoid preventable foreclosures"
* "Since last year, Treasury has worked with leading housing counselors, mortgage servicers and investors through the HOPE NOW Alliance to reach and help homeowners who both want to keep their homes and have the basic financial wherewithal to do so"
* "The adoption of this streamlined modification framework is an additional tool that servicers will now have to help avoid preventable foreclosure

This plan is based on with the line of attack the FDIC has taken to help an alleged 200,000 homeowners per month. Let us know how you feel about this restoration strategy in the forum. This plan does not further address the mortgage finance plan that Ben Bernanke outlined earlier this month in a statement at the UC Berkeley/UCLA Symposium. If you missed it or just want to refresh your memory here is the link to his statement. The Future of Mortgage Finance in the United States.

As we write at 9:30am EST the benchmark 5.5 FN MBS is trading up 4 ticks at 99- 22/32. 5 yr swaps are tighter to the yield curve and 3 month LIBOR is 2.1325%. The 6.0 FN MBS is up 6/32 to 101- 6/32 and the 5.0 FN MBS has been bid up 7/32 to 97-5/32. Only a few investors have published rate sheets so far….if MBS pricing remains stabile expect marginal gains on rate sheets.

We will post Paulson's statement as soon as possible.

The only scheduled data of major concern is a $20bln auction of 10yr treasuries at 1pm.