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Tuesday, December 2, 2008
Paulson's new cure: Cheap home loans (again)

"The housing correction is at the root of our economic and market difficulties," Treasury Secretary Henry M. Paulson Jr. said yesterday. "The most important thing we can do to mitigate foreclosures and progress through the housing correction is to reduce the cost of mortgage financing, so more families can afford to buy a home, and so homeowners can refinance into more affordable mortgages."

Despite his bailouts of Fannie Mae and Freddie Mac, home-loan rates "have not come down as much as we may have hoped," Paulson said. But last week's $600 billion Federal Reserve home-loan finance project should drive rates lower, he added.

"We continue to look for additional ways to make mortgage credit more affordable," Paulson concluded, "which will stimulate purchases, help to stabilize prices, and end this housing correction."

Well, we'd love to see exploitative loan terms replaced by reasonable, affordable arrangements. It's dangerous when the people least able to pay are slapped with the highest payments.

But this is about execution, not intent.  Isn't cheap credit for everyone -- including speculators and homeowners buying beyond their means, and lenders and investors too greedy to care -- what got us into this mess in the first place?

We hope Mr. Paulson is making sure the folks using the people's money are being more careful this time. Because if you really don't expect to get paid back, they're not really loans.

Paulson's remarks here. (This item expanded from today's print PhillyDeals column)

 

 

 

Posted by Joseph N. DiStefano @ 12:20 PM  Permalink | 3 comments
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Comment removed.
Posted 01:18 PM, 12/02/2008
distefj
Laser, 1) Don't you mean "deadbeats"? "Beets" are vegetables. 2) It would still be a tragedy, but it wouldn't be as much of a financial threat if banks thought they could quickly resell foreclosed properties. But as things stand, aren't they afraid of getting stuck with properties no one wants? Might be cheaper to renegotiate some loans with those buyers who can handle lower payments. Joe D.
Posted 01:41 PM, 12/02/2008
dreinterests
Paulson has it backwards. Cheap credit is "at the root of our economic and market difficulties" causing people to respond by doing what we always do when thigns are cheap, using more than we need. It caused imbalances in housing, commodities, consumption (versus saving), and, consequently, production versus importation. Paulson almost let's economics through though, by using the word correction. If it's a correction, is it wise to prevent ourselves from being corrected? Isn't using cheap credit to avoid the last correction (2000-2) and get us out of the one before (1992)how we got here in the first place?
3 comments
About Joseph N. DiStefano
Joseph N. DiStefano writes this blog to feed his PhillyDeals column, which is printed in the business pages of The Philadelphia Inquirer every Sunday, Tuesday, Wednesday, Thursday and Friday. Joe has worked at the Inquirer, mostly, since 1988. He has also written for Bloomberg and Gannett, authored the book Comcasted, majored in economics at Penn, and fathered six children. Reach Joe at 215-854-5194 and JoeD@phillynews.com

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