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The Treasury secretary said the government should take some steps, such as nationalizing standards for the licensing and monitoring of mortgage brokers, which could clamp down on predatory behavior by unethical lenders. But he stressed that there was no call for a government bailout.
"When investors are relieved of the cost of bad decisions, they are more likely to repeat their mistakes," Paulson said in a speech at Georgetown University Law Center. "I have no interest in bailing out lenders or property speculators."
Paulson has urged private-sector action, calling a meeting last month to discuss bond-market troubles. Three big banks announced plans Monday for an $80-billion fund to buy bonds whose values have plummeted in the wake of the credit crunch induced by the sub-prime mortgage troubles.
The comments he made in the speech at Georgetown marked a change in tone by the administration.
Until now, President Bush and his advisors had suggested that the problems appeared to be contained to the housing sector and would not trigger a recession.
Mickey Levy, chief economist at Bank of America Corp. in New York, said Paulson's giving a speech about housing was enlightening.
"The fact that he addresses this issue reflects heightening concern by the administration regarding the implications for the rest of the economy of the housing downturn and the growing problem with housing finance," Levy said.
Ken Goldstein, an economist with the Conference Board in New York, countered that as bad as the situation might be now, "it's not intensifying."
"My view is that indeed, we're mired in a slump in housing. I don't really think it's getting much worse," Goldstein said. "But I do agree it will take until 2009 until we start to see housing improve a little bit."
The bad news continued Tuesday as Countrywide Financial Corp., the nation's largest mortgage lender, reported it would take a pretax restructuring charge of $125 million to $150 million to cut expenses because of slower lending. The Calabasas-based mortgage giant said it might cut 10,000 to 12,000 jobs.
D.R. Horton Inc., the nation's second-largest home builder, said its new-home orders fell to a six-year low in the third quarter because of customer cancellations and tighter financing.
peter.hong@latimes.com
maura.reynolds@latimes.com
"When investors are relieved of the cost of bad decisions, they are more likely to repeat their mistakes," Paulson said in a speech at Georgetown University Law Center. "I have no interest in bailing out lenders or property speculators."
Paulson has urged private-sector action, calling a meeting last month to discuss bond-market troubles. Three big banks announced plans Monday for an $80-billion fund to buy bonds whose values have plummeted in the wake of the credit crunch induced by the sub-prime mortgage troubles.
The comments he made in the speech at Georgetown marked a change in tone by the administration.
Until now, President Bush and his advisors had suggested that the problems appeared to be contained to the housing sector and would not trigger a recession.
Mickey Levy, chief economist at Bank of America Corp. in New York, said Paulson's giving a speech about housing was enlightening.
"The fact that he addresses this issue reflects heightening concern by the administration regarding the implications for the rest of the economy of the housing downturn and the growing problem with housing finance," Levy said.
Ken Goldstein, an economist with the Conference Board in New York, countered that as bad as the situation might be now, "it's not intensifying."
"My view is that indeed, we're mired in a slump in housing. I don't really think it's getting much worse," Goldstein said. "But I do agree it will take until 2009 until we start to see housing improve a little bit."
The bad news continued Tuesday as Countrywide Financial Corp., the nation's largest mortgage lender, reported it would take a pretax restructuring charge of $125 million to $150 million to cut expenses because of slower lending. The Calabasas-based mortgage giant said it might cut 10,000 to 12,000 jobs.
D.R. Horton Inc., the nation's second-largest home builder, said its new-home orders fell to a six-year low in the third quarter because of customer cancellations and tighter financing.
peter.hong@latimes.com
maura.reynolds@latimes.com
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