Housing rescue bill, part II
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Over the weekend, Congress approved the housing rescue bill -- which was designed to help thousands of homeowners avert foreclosure and extend a lifeline to Fannie Mae and Freddie Mac if they need it.
Today, Treasury Secretary Henry Paulson unveiled another piece of the government’s plan to help shore up the housing market: greenlighting banks’ use of so-called covered bonds to pump more money into the U.S. mortgage market.
‘I believe covered bonds have the potential to increase mortgage financing, improve underwriting standards and strengthen U.S. financial institutions by providing a new funding source that will diversify their overall portfolio,’ Paulson said in a statement.
Maybe. Wall Street was less-than-enamored with the idea, as markets columnist Tom Petruno explains on his blog Money & Co. He also explains how these bonds work, noting that they are big in Europe.
In a commentary today entitled ‘Will the 2008 housing bill save the housing market?,’ William Wheaton, (registration required) a MIT economics professor and a principal at Torto Wheaton Research, sees the Fannie and Freddie safety net as the key -- and perhaps only -- worthwhile provision of the housing bill. He sums up the situation thusly:
‘What the current housing market needs is more sales, more transactions and a return to liquidity with normal moving/mobility. This, coupled with continued low new construction, will reduce the inventory of unsold units and allow prices to stabilize and then recover.’
-- Annette Haddad
Questions? Comments? Email: annette.haddad@latimes.com