Bernanke’s big idea
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Much of the attention of Fed Chairman Ben Bernanke’s testimony before Congress on Thursday was focused on his remarks about the economy. Ben’s bottom line: The slumping housing market won’t derail the economy.
But the Fed chairman also suggested a bold new idea: government-backed mortgage guarantees for home loans of up to $1 million.
From MSNBC.com: ‘Bernanke proposed the so-called ‘government-sponsored entities’ like Freddie Mac and Fannie Mae pay mortgage insurance fees to the federal government. These GSEs would then guarantee loans that are larger than the current $417,000 limit on so-called ‘conforming’ mortgages.’
New York Democrat Charles Schumer endorsed the idea and said he might back it with legislation.
Bernanke’s plan would certainly quiet those who believe the conforming loan limits should be raised to jumbo status to help solve the current credit crunch. And Freddie and Fannie would pay mortgage insurance fees to the government. Ben also says he would want the new loan guarantees to be temporary.
Is it a good idea?
Big Ben also told Congress that the Fed plans to issue a proposal by year’s end that would create new standards for all lenders that issue sub-prime loans.
About time.
Comments? Thoughts?
-- Posted by Annette Haddad
Photo credit of Jumbo the elephant: Melville Munro (1935)
P.S. A shoutout to reader Xtine for calling attention to a N.Y. Times article today about a hapless real estate speculator who lost it all. Enjoy.