Banks are extending a helping hand to distressed home owners as the list of major banks that will temporarily refrain from foreclosure has grown today. That list now includes Morgan Stanley (MS), Citigroup (C), and JP Morgan Chase (JPM) as the banks wait for a more detailed plan from the Obama administration. Over the last few days, many have spoken out that the housing market is at the root of our current economic difficulties and any plan to stabilize the economy should include some mechanism to stabilize the housing market from its free fall. Which seems logical with the amount of wealth average Americans have tied to the market, and the sector of the economy that revolves around real estate. This was an unexpected move based on these institution’s CEO’s appearance before congress earlier in the week. Why then was the market non responsive to this attempt to stabilize the housing sector? As more than an hour after the announcement there was still no sign of response from the stock market, as Fox Business noted:
“Once again J. P. Morgan, Citi and now Morgan Stanley issuing these moratoriums. Does it help? Hasn’t helped the market yet. I’ve been watching since that kind of where we were. I would have expected a little bounce.”
The letter to the House Financial Services Chairman Barney Frank from JP Morgan CEO stated that the banks are voluntarily issuing this moratorium for the next three week. This after, Rep. Frank urged banks to do just this earlier in the week. The market seems unimpressed but perhaps this will give the housing market a sense of stability while the Obama administration formulates its plan. This could just be a preemptive move by the banks before they are compelled to do this by a possible government plan. This is yet another example of banks allowing the government to dictate their business practices, which we think will continue to be a theme of any news developments over the next few months and possibly years.