President George W. Bush's plan designed to limit the number of Americans who default on subprime mortgages might be a small positive for the commercial and investment banks exposed to them but does little to alleviate broader concerns about credit losses, analysts said.

The proposal is not an overnight fix for sure, said Erin Archer, analyst at Thrivent Financial for Lutherans in Minneapolis. These problems have to work their way through the market.

Bush on Friday proposed steps to allow the Federal Housing Administration, a government-sponsored mortgage guarantor, to permit homeowners with good credit who can't afford their mortgage payments to refinance into FHA-insured mortgages.

He also pledged to work with the Democratic-controlled Congress to temporarily change a tax code provision to make it easier for homeowners to refinance their home loans.

Analysts said the proposals, even if adopted, wouldn't solve problems that have bedeviled banks and their shareholders this summer.

They said investor fear will be a big factor affecting shares of Wall Street and commercial banks at least until mid-September. That's when Bear Stearns Cos, Goldman Sachs Group Inc, Lehman Brothers Holdings Inc and Morgan Stanley report their quarterly results and may better define how bad their credit and mortgage problems are.

But the news is a bit of a positive -- on Friday afternoon, shares of Lehman were up 2.1 percent to $54.92, Bear Stearns 1.7 percent to $108.54, and JPMorgan Chase & Co 1.6 percent to $44.66. All had been farther ahead in the initial euphoria after Bush's announcement.

Bank and brokerage stocks have suffered this year as rising subprime mortgage defaults have made investors less willing to take risk, and in particular to buy various forms of debt including repackaged mortgages.

That has forced banks and brokers to hold onto more assets, tying up their capital and potentially forcing write-downs and credit losses.

Even for the second quarter, before much of the market's recent liquidity problems, Citigroup Inc, Bank of America Corp, JPMorgan Chase and Wachovia Corp each reported large double- or triple-digit percentage increases in the amounts they set aside for credit losses.

Through Thursday, the Philadelphia KBW Bank Index was off 11.4 percent for 2007 to date.

Lehman is down 35 percent off its 2007 peak, Bear is down 36 percent and JPMorgan Chase is down 16 percent.


The New York Times said that 2 million subprime borrowers would see mortgage payments rise dramatically in the coming year and a half as rates on adjustable mortgages adjust higher. Under Bush's plan, an additional 80,000 people might get FHA-guaranteed loans, the New York Times reported.

That seems pretty minor in the scheme of things, said Zach Gast, an analyst covering financial stocks at RiskMetrics in Rockville, Maryland. I don't know how much it means for the economy.

These measures might prevent banks from having to foreclose on some loans, and could make issuance and trading in some markets marginally more active, but any impact would be slight, analysts said.

Bush and Federal Reserve Chairman Ben Bernanke said they would not bail out lenders that made bad decisions.

But analysts said the government's willingness to step into the market now is better than nothing.

It gives a general sense that the government will not let the problem get out of hand, said Kevin Fitzsimmons, banking analyst at Sandler O'Neill & Partners LP in New York. It gives investors confidence there's a ceiling in the number of potential foreclosures.

(Reporting by Dan Wilchins; additional reporting by Jonathan Stempel)