Paulson Bond Proposal Aims to Stave Off Foreclosures
Economy, Economy-US, Quipu Economic Forum
TREASURY SECRETARY’S PLAN IS LATEST ATTEMPT TO PREVENT SEVERE ECONOMIC CONSEQUENCES IF MILLIONS LOSE HOMES
Quipu Economic Forum :: The Secretary of the US Treasury Dept., Henry Paulson, has proposed a plan whereby Congress would approve new legislation allowing state and local governments to issue tax-exempt bonds to homeowners with adjustable rate mortgages who need to refinance in order not to suffer foreclosure. The plan would allow “innovative mortgage programs” to be kept at lower cost, allowing affected borrowers to keep their homes while they pay down potentially crippling loans.
Agence France Presse reports “Paulson has also been working with banks to set up a ’superfund’ to buy up distressed mortgage securities hurting the balance sheets of major finance institutions.” This is partly due to the feeling that lending institutions and major investment houses have driven the crisis due to their attitude toward the long-term value of high-risk mortgage schemes.
The Chicago Tribune reports economic analysis citing the current housing and mortgage crisis as “the most serious housing downturn since the Great Depression”. Sec. Paulson has also pushed for a freeze on adjustable rates, in an effort to prevent a widespread sudden rise that could lead to hundreds of thousands of foreclosures in a short span of time.
Democratic presidential candidate, and New York senator, Hillary Rodham Clinton, has urged Paulson to place a moratorium on foreclosures, for at least 90 days, on occupied homes. The senator is also calling for rates on all sub-prime loans to be frozen, then transformed into “affordable, fixed-rate” mortgages. The stakes are high, as analysts and policy-makers agree, the efficacy of steps taken could determine whether the US enters a prolonged recession.
- AFP: “Paulson proposes tax-exempt bonds for mortgage aid”
- Chicago Tribune: “U.S. puts heat on lenders to freeze rates”
- Quipu: “Housing Market Crisis Tied to Speculation, ‘Predatory’ Lending”
December 4, 2007 :: by jr3o