Fed Extends Bailout; Bush Signs Housing Bill

Will they make up their minds already?

The Federal Reserve announced today it will extend its emergency borrowing program to Wall Street firms. The program was originally supposed to last until mid-September, but that date has been extended through January 30.

What does this mean? Simply, big investment companies hurting from the mortgage meltdown can get a quick cash fix from the central bank. Of course, the Fed reserves the right to cancel the program at any time provided that the "fragile circumstances in financial markets" become less fragile.

This news rides in on the coattails of President Bush's approval of a massive housing bill, intended to bailout 400,000 struggling homeowners. Let me nutshell it for you: This legislation allows homeowners to refinance into affordable government-supported loans instead of losing their homes.

Sounds like a promising alternative to the current housing crisis, doesn't it? This is one of the most drastic measures our federal government has taken since the Great Depression! Not only does the bill provide relief to debt-ridden homeowners, it essentially revamps the Federal Housing Administration and grants blanket authority to the Treasury Department–through 2009–to bail out mortgage-giants Fannie Mae (FNM) and Freddie Mac (FRE). The Federal Reserve's newly acquired role in all of this is one of the omniscient overseer.

Despite the financial lifeline extended to Fannie and Freddie, and the fervent opposition from diehard Republicans, President Bush–on the advice of Treasury Secretary Paulson–signed the bill.

"We look forward to put in place new authorities to improve confidence and stability in markets," said White House spokesman Tony Fratto. He continued, "The Federal Housing Administration will begin to implement new policies intended to keep more deserving American families in their homes."

While all of this is well and good, from an investor's point of view this measure further indicates the magnitude of the ongoing crisis in financial markets. As investors continue to grapple with housing concerns, we have to focus on the real news of the day–the news that could make or break our portfolios.

In a word: earnings. We're at the height of earnings season, folks, and unfortunately Wall Street seems disoriented. Analysts are jumping from one sound bite to the next, completely losing sight of the big investment picture.

Take Potash (POT), for example, one of my favorite Blue Chip Growth stocks. Last week, POT reported earnings up 220%! The increasing demand for agricultural products and the wide profit margins of fertilizer companies like Potash continue to fuel our Buy List. As bad news continues to stream out of the financial sector, our Blue Chip Growth Buy List is performing off the charts now that earnings season is in full swing. The trouble in financials may be far from over, but that doesn't mean investors should give up on the stock market.

By all means, if you trust that banks have bounced back, then stake your claim in financial companies. But I wouldn't go near them with a 10-foot pole! Many investors still have their doubts, too–otherwise they wouldn't have sold-off their positions after the recent rally!

Don't let your focus waver–subscribe to Blue Chip Growth today and find out which 50 stocks are the best bets right now. Cash in the right way this earnings season!