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Missed this Saturday Night Live skit until now. It’s short and sweet.

Starbucks is reportedly adding alcohol to the menu at one of its stores. When asked why, a spokesperson for Starbucks said, “Because sober people don’t pay eight bucks for a cup of coffee.” I wouldn’t either, and given today’s GDP numbers, neither would many others. GDP, which measures the value of all goods and services produced within U.S. borders, showed that (surprise!) the U.S. economy barely grew during 2008. Previous figures were revised downward to be about a third the rate previously thought, mostly because attributed to plunging home values undermining consumer spending. For all of 2008 GDP was +.4% instead of +1.1% as previously reported. More germane to mortgage banking, spending on residential construction was down almost 23% in 2008. And consumer spending, which makes up about 65% of GDP, was down .2% for the year.

In the 2nd quarter of 2009, the number was actually a little better than expected, falling at a 1% annual rate. (In the first quarter GDP was -6.4%.) Still, with the contraction in the second quarter, U.S. GDP has fallen for four straight quarters for the first time since government records started in 1947. Residential investment dropped at a 29.3 percent rate in the April-June period after plummeting by 38.2 percent in the first quarter. more…

From the Wall Street Journal:

BlackRock Inc. reached an agreement to buy Barclays Global Investors from Barclays PLC for $13.5 billion, creating a money-management titan roughly twice the size of its closest competitor.

The firm, renamed BlackRock Global Investors, will have more than $2.7 trillion in assets under management. The deal makes BlackRock, already a major player in actively managed stock, bond and alternative-investment products, an indexing giant and the largest U.S. provider of exchange-traded funds. more…

PennyMac, a firm founded by Stanford Kurland and backed by BlackRock and Highfields Capital, bought $558m of home loans from the FDIC. PennyMac was formed by Kurland after he left Countrywide to do exactly this—take bad loans off of the books of other institutions and do it at a deep discount. According to Bloomberg:

…The firm is paying an average of 30 cents to 50 cents on the dollar for the loans and the FDIC is sharing some of the risk, spokesman Andrew Chang said. more…

Following their announcement last week, The New York Fed started buying mortgage bonds as of Monday. When bond prices rise on buying activity, yields (or rates) drop. Their target is to buy about $500b of mortgage bonds over the coming months to help push rates down and keep them down. They’ve hired Blackrock, PIMCO, Goldman and Wellington to manage this buying, and will make public announcements Thursdays on their buying activity.

For consumers looking to refinance their mortgage, this doesn’t automatically mean rates will keep dropping. They’ve already dropped close to their expected lows as private and institutional investors piled into mortgage bonds since Thanksgiving to get ahead of this Fed buying. These investors may exit and take profits as the Fed enters. So the current rate ranges we’re in are close to what consumers can expect. The exceptions where rates dip lower come on any given trading day. The way for a consumer to get the lowest rate is to… more…

Yesterday the Fed confirmed their pre-Thanksgiving commitment to buy $500b in Fannie/Freddie bonds to push mortgage bonds. They they’ve hired BlackRock, Goldman Sachs, PIMCO and Wellington to manage the purchases which are set to begin early January.

Mortgage bonds have already had another rally on the news. For obvious reasons, investors want to get in ahead of this purchase program. When the Fed buys mortgage bonds, it caused bond prices to rise and yields (or rates) to fall. We can’t count on a full effect of $500b in investment, because the announcement has caused billions already to go into mortgage bonds which has caused the massive rate drops we’ve already seen. So these investors will begin taking profits and selling as the Fed steps in with buying. More to come on rate targets borrowers should be thinking about.

President Bush signed the bailout bill shortly after it was passed by the House today (it passed the Senate yesterday). Below is Treasury Secretary Henry Paulson’s statement today on the bailout bill. Feels Palin-like in its generalized tone, but that’s because he’s already doing the real work behind the scenes. Under the bill, Treasury has immediate authority to purchase up to $250b in troubled assets from financial firms (plus $100b more with White House approval, and $350b more with Congressional approval). Treasury will hire as many 30 staffers and 10 outside money managers to identify, value, and manage reverse auction bidding for illiquid mortgage backed securities. Bloomberg reports that PIMCO, Blackrock and Legg Mason are so far likely to be hired because of their role in advising Treasury on the bailout so far.

As for staff, Paulson hired Goldman Sachs exec Ed Forst last week to play a key role in staffing and also establish the new Office of Financial Stability, which is ostensibly the infrastructure being created to monitor this after Paulson is gone—if he doesn’t stay on after the new President takes office in January. More from the Bloomberg report: more…