Paulson: “These are not normal times”

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Those of you curious to hear more from the treasury secretary on the subject of housing will find this interesting: Henry Paulson (pictured) sat down with the LATimes editorial board this week to discuss the foreclosure mess. Highlights:

Paulson believes current disclosure requirements for mortgages are a joke: ‘It’s sort of, ‘Everybody cover their rear end,’ protect themselves legally. But, I’ve made the case several times, with all the disclosure there should be one simple page signed by the lender and the borrower that says, ‘Your monthly payment is x and it could be as high as y in a couple of years.’’

All well and good, but talk is cheap. Does Paulson intend to do anything about it?

On why the rate-freeze for some sub-prime borrowers is necessary: ‘I think what we’re doing is avoiding a market failure that would have forced housing values down in a way that was not in the investors’ interest, and in a way that the market wasn’t intended to work.’

Got it. And exactly how is the market intended to work after a historic bubble bursts? Paulson: ‘What I want is markets to work. And I would define a market failure as the system not being able to cope with the wave, so that foreclosures took place that would not have taken place if there were smaller volume.’

What does he mean by ‘market failure’? Paulson: ‘As I’ve said, chaos.’

The entire interview makes for interesting reading. Paulson twice punts on the question of whether housing prices are too high, and repeatedly expresses frustration at what he lables ‘skepticism’ about the rate-freeze plan.

Your thoughts? Comments? Email story tips to peter.viles@latimes.com
Photo Credit: LATimes.