From Chris Gaffney, CFA and Vice President of World Markets at EverBank

What's Happened:

The Senate passed the massive housing-rescue legislation which had made it through the House on Wednesday.

President Bush dropped his opposition to the bill last week, so I would expect him to sign it quickly. The bill offers emergency funding to Fannie Mae and Freddie Mac along with establishing a US$300 billion fund to help struggling homeowners. My colleague Chuck Butler is NOT a fan of this bailout. Here's an email he sent me last night:

What I Say:

"The currency markets were dominated by a bias to buy dollars based on the Housing Legislation that passed last week...It's just another "bailout" I don't care how much lipstick they put on this pig, it's still a pig! Here's the skinny on the bail out...

"The bill features a combination of tax relief for homeowners, a new regulator for Fannie Mae and Freddie Mac, and a US$300 billion program to avert foreclosures. Also included is a dramatic Treasury Department proposal to help restore confidence in Fannie Mae and Freddie Mac by increasing their US$2.25 billion lines of credit with the Treasury, as well as allowing the government to potentially buy an equity stake in the firms.

"Another US$300 billion to help out...another US$300 billion added to the US$150 billion we already added to our debt earlier this year with stimulus checks...where does this end? Well, I'll tell you where it looks like it's all going to end. Can you say, 'we live in a banana republic?'"

Apparently the currency markets agree with Chuck, as the dollar reversed all its gains from last week