CBO: Write-downs won’t stop housing slump

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From where I sit, Congress appears headed toward approval of some version of the Frank-Dodd plan to encourage banks to write down mortgages and then have the federal government guarantee them, in hopes of avoiding hundreds of thousands of foreclosures. But would the policy work? Would it help the overall economy?

Enter the Congressional Budget Office: ‘U.S. lawmakers’ plans to aid troubled homeowners would likely help prevent many foreclosures but wouldn’t stop the freefall in home prices or stabilize the economy, a congressional report said on Friday.’

More, from the AP: ’ ‘Such actions could help reduce the number of foreclosures... (but) would significantly shift the risk involved in mortgage losses from the current lenders and investors to taxpayers,’ said a report from the CBO, which gives nonpartisan research advise to lawmakers.’

Read the CBO report here.

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Photo Credit: AP