Vail Daily column: Will FBI shakeup impact United States’ mortgage rates?
May 12, 2017
Whatever your thoughts are on the firing of James Comey and President Donald Trump, if you are considering getting a home mortgage, then you might want to watch the financial markets, as there could be some fallout and it could go either way. This is not what the Democrats think of the Republicans anymore; it's gone way beyond that.
Whether the firing was justified or not is yet to be determined and could be a source of debate for years to come. But regardless of reality and facts, perception around the world seems to be that of skepticism and alarm that the democracy of the United States is showing some serious cracks and our nation's credibility is at stake requiring a prompt resolution of the controversy surrounding the actions of the President.
Many in Congress are viewing this as the possible last straw in a call for a special prosecutor to not only investigate the Trump organizations ties to Russia, but also whether the President of the United States sought to impede and disrupt a lawful investigation into those ties. They should be deeply concerned, and the truth, whatever it may be, must be found.
If Trump pulled a Nixon, then the show is only starting. The credibility of the Union depends on Congress doing something; to do nothing would send a second shockwave around the world, and that would not be a good thing for U.S. financial markets or our quality of life in general.
If the findings of the investigation showed cause for pursuing impeachment hearings and history repeated itself from the Clinton impeachment hearings, then investors might feel uncertain about the future business climate in the United States and the recent gains since the election in the Dow might evaporate as investors flee stocks and load up on bonds. When that happens, there is an influx of cash to lend out on mortgages and mortgage rates drop to spur demand.
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A possible counterweight to this outcome is the generally improving world economy and continued decline in the unemployment rate, both in the United States and many other nations. The Federal Reserve has multiple credible reasons to increase short-term interest rates to tamp down the supply of cash and temper demand for goods and services to sustainable levels, as do several other major central banks around the globe.
The next factor in play is if an impeachment is seen as adding uncertainty to the value of U.S. companies, but foreign markets look ripe for growth — investors might behave differently than in the past and simply switch their money to foreign equities, skipping their usual refuge in times of uncertainty of U.S. treasury markets, which would then let the Fed increases in short-term rates trickle down into long-term rates because investors would not be busy diluting the impact of the Fed's efforts to tighten up the money supply.
But one of the biggest concerns being whispered out there is what if the U.S. Congress does nothing, and what does that mean for the credibility of the United States as a world leader? If it is widely perceived abroad that Trump pulled a Nixon and, unlike Nixon, got away with it due to the Republicans lining up along party lines refusing to even investigate, then it could be the beginning of a distrust by foreign investors in our system of checks and balances, and if that happens, foreign investors may start to dismiss the United States as a viable and credible world leader and the stock markets could take a hit, as well as the bond markets, which would not be a good thing for anyone from a billionaire to a minimum-wage worker.
Chris Neuswanger is a mortgage loan originator with Macro Financial Group in Avon and may be reached at 970-748-0342. He welcomes mortgage-related inquiries from readers. His web and blog live at http://www.mtn mortgageguy.com.
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