The government, Federal Reserve should be bailing out homeowners not the mortgage companies and banks that made those predatory real estate loans in the first place. It was the collapse of the housing bubble that caused the current financial crisis. It is the consumer whom should get the greatest relief.
The Federal Reserve said Tuesday it will buy up to $600 billion in mortgage-backed assets in another attempt to deal with the financial crisis.
The Fed said it will purchase up to $100 billion in direct obligations from mortgage giants Fannie Mae and Freddie Mac as well as the Federal Home Loan Banks. It also will purchase another $500 billion in mortgage-backed securities, pools of mortgages that are bundled together and sold to investors.
The $600 billion effort on mortgages came as the Fed also unveiled a new program to help unfreeze the market that backs consumer debt such as credit cards, auto loans and student loans.
The program on consumer debt will lend up to $200 billion to the holders of securities backed by various types of consumer loans. Treasury Secretary Henry Paulson had said recently that the government was working on the new program, which will be supported by $20 billion of credit protection provided by the $700 billion bailout fund.
Meanwhile the horrible economic news gets worse:
The US economy contracted at a 0.5 percent pace in the third quarter, the government said Tuesday, revising down its earlier estimate for gross domestic product (GDP).
Last month, the Commerce Department in its first estimate had pegged the downturn at 0.3 percent.
The latest revision was in line with forecasts by private economists and reflected weaker consumer spending, exports and government expenditures.
The report reflected an abrupt turn from growth of 2.8 percent in the second quarter, although analysts said that figure was skewed by a surge in exports and consumer spending boosted by one-time tax rebates.
Many economists say the downturn in the fourth quarter could be much worse, reflecting a credit crunch and ongoing woes in housing and manufacturing.
The collapse continues:
Prices of single-family homes in September plunged a record 17.4 percent from a year earlier, according to the Standard & Poor's/Case-Shiller Home Price Indices issued on Tuesday.
The composite index of 20 metropolitan areas fell 1.8 percent in September from August, S&P said in a statement.
S&P said its composite index of 10 metropolitan areas declined 1.9 percent in September from August for a 18.6 percent year-over-year drop, also a record.
The rate of home price declines has accelerated on a quarterly basis too.
In the third quarter, the decline in the S&P/Case-Shiller U.S. National Home Price Index -- which covers all nine U.S. census divisions -- remained in double digits, posting a record 16.6 percent decline versus the third quarter of 2007. This has worsened from the annual declines of 15.1 percent and 14.0 percent, reported for the second and first quarters of the year, respectively.
Does Obama have a clue?:
President-elect Barack Obama wants to project fiscal restraint even as his economic team assembles a massive recovery package that could cost several hundred billion dollars.
A day after introducing the captains of his economic team and promoting a giant jobs plan, Obama on Tuesday was to lay out his budget belt-tightening vision. The dual images — big spender and disciplined budget watcher — were designed to give both political and economic assurances to the public, the Congress and the financial markets.
Obama also was expected to introduce Peter Orszag as his new director of the Office of Management and Budget, the White House office that serves as a funnel for federal agency budget requests. Orszag is the current director of the Congressional Budget Office.
Obama's economic team embodies what at first glance seem to be mutually exclusive goals. Timothy Geithner, Obama's choice for treasury secretary; Lawrence Summers, who will head the National Economic Council; and Orszag all have links to Robert Rubin, who as President Clinton's treasury secretary pushed for a balanced budget.
But all three will also be part of an administration that will drive deficits to new heights with an economic plan designed to save or create 2.5 million jobs and redirect the economy over the next two years. Economists from across the political spectrum, including some who have served as informal advisers to Obama, have put the size of an economic recovery package as high as $700 billion over two years.
No comments:
Post a Comment