Financial exchange traded funds (ETFs) have been up this week possibly because of rumors that Fannie Mae and Freddie Mac might purchase more home mortgages. If the government-sponsored companies were permitted to do this, it would likely alleviate some of the housing market’s tension, according to Randall W. Forsyth for Barron’s. However, financial ETFs have a long way to go as Financial Select Sector (XLF), for example, is down 4.5% year-to-date. iShares Dow Jones U.S. Financial Sector (IYF) and Regional Bank HOLDRs (RKH) echo XLF’s performance.

Problems such as domestic tightening credit, employment verification and lax credit approvals continue to plague the financials sector. One website offers employment verification and pay stubs to the unemployed so that customers can qualify to buy a house, rent an apartment, etc, that Fred Fuld for Stockerblog found through a Financial Times article. If that weren’t enough of an example for why financials are suffering, add that French bank BNP Paribas froze three security funds that invest in U.S. subprime mortgages because it was unable to properly value their assets, according to Tim Paradis for the Associated Press. Commercials advertising credit approval for consumers with poor or no credit seem to be proliferating and aren’t helping the current situation as well. When will this mess end?


The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.