Most economists agree that keep global financial markets liquid - - and filled with dollars - - is an important part of the effort to end the global financial crisis.

Further, along with the removal of toxic assets from bank and financial institution (FI) balance sheets, stemming the rise in home foreclosures among borrowers capable of servicing their mortgages is another key to ending both the financial crisis and the home foreclosure/asset price decline cycle, many economists agree.

Moreover, it looks like federal officials and banks - - after a slow start - - will launch a new, major program to keep more families in their homes. The federal government may start guaranteeing home mortgages to persuade lenders to modify home loans, the chairwoman of the Federal Deposit Insurance Corporation said, Reuters reported Friday.

FDIC Chairwoman Sheila Bair said that under a program her agency and the U.S. Treasury Department are working on, a bank/lender would be required to significantly drop the interest rate, reduce the principal or extend the life of affected loans, The Washington Post reported Friday. In return, the bank/lender would get a government guarantee that the mortgage would be repaid.

Bair, in testimony before the Senate Banking Committee, could not provide an estimate regarding how much the program would cost, but underscored that the bank rescue program passed by Congress earlier this month give the Treasury power to use loan guarantees and credit enhancements to modify loans to prevent avoidable foreclosures, Reuters reported Friday.

IndyMac Bancorp.'s failure, along with the failure of seven other banks this year, has erased 17% from an FDIC insurance fund, and will likely propel an increase in insurance fund premiums, Bloomberg News reported Monday.

IndyMac may cost the fund $4-8 billion, in addition to $1.16 billion in earlier bank foreclosure costs, Bloomberg News reported Monday. Premiums for the deposit insurance fund are likely to rise, an FDIC official said.

Economist Peter Dawson said Monday a premium increase would represent the most prudent course for the FDIC.

"Needless to say, given the bank failures, this doesn't come as a surprise or a shock. The FDIC could have explored other funding options, but given the scope of the insurance funds claims, a premium increase would make the most sense at this time," Dawson said.

The FDIC is required to replenish the fund when the reserve ratio, or the balance divided by insured deposits, slips below 1.15%, Dawson said.

On the heels of U.S. Federal Reserve Chairman Ben Bernanke's comments on "renewed turbulence," many traders and investors across sectors now expect the Fed to cut key short-term interest rates when it meets on December 11, according to one currency trader.

"I won't give you all the technical indicators, but basically almost all of them are pointing to a rate cut by the Fed when it meets [on December 11]," Currency Trader Andrew Resnick told BloggingStocks Friday. "The issue now is whether the Fed continues to cut after the December meeting."

Markets rally

Stock rallied early Friday on Bernanke's comments, with the Dow gaining over 80 points to about 13,394 and the Nasdaq gaining about 4 points to 2,674. Meanwhile, the dollar gained slightly, improving to $1.4730 against the euro and rising to 111.07 yen against the Japanese yen.

"Typically, when the Fed indicates it's likely to cut rates that causes the dollar to fall, but in this case, the market is saying 'The Fed is going to help the [U.S.] economy grow faster,' which is bullish for the dollar," Resnick said. Resnick added that he was flat - - or had no currency positions - on Friday.

U.S. Treasury Secretary Henry Paulson is on the wires again, this time predicting that the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007.

In an interview with The Wall Street Journal (subscription required), Paulson said, "The nature of the problem will be significantly bigger next year because 2006 (mortgages) had lower underwriting standards, no amortization, and no down payments. He added that "We'll watch carefully mortgages that will be reset."

Home prices fall

Paulson's comments came before the National Association of Realtors announced that home prices had fallen in 51 of 150 U.S. metropolitan areas in Q3, with the median sales price falling to $220,800 in Q3 2007, compared to $225,300 in Q3 2006. The NAR also announced that home sales fell to an annualized rate of 5.42 million units, including single-family homes and condominiums, compared to a 6.29-million-unit annualized rate a year ago.