Fed Proposes Help for Housing Market
Posted on January 9th, 2012
The Federal Reserve has actively tried to stimulate the housing market since the beginning of the recession, dropping interest rates to record lows and buying up mortgage-backed bonds to free of market lending capital. Yet recent actions from the Fed show that it has essentially run out of options to help pull the mortgage market out of the doldrums. It had now turned to Congress, suggesting more ways they could help turn the situation around.
Typically during a recession, the Fed has been able to stir up activity in the housing market by simply lowering interest rates, making buying and refinancing much more attractive. Yet this recession has been unique as home prices have fallen 33 percent from the housing boom high in 2006. That has cost homeowners roughly $7 trillion in home equity, leaving about 12 million of them underwater, or owing more on their homes than they are now worth. So even with record low rates, many borrowers are simply unable to take advantage of them.
Now the Fed is feeling the need to push other options in order to bring life back into the mortgage market. Last week, Federal Reserve chairman Ben Bernanke sent recommendations to Congress, asking them to consider using mortgage finance companies Fannie Mae and Freddie Mac to open up more credit to interested borrowers. Yet the companies, which were bailed out and placed under government conservatorship in 2008 have already cost taxpayers billions of dollars and their regulator, the Federal Housing Finance Agency has been very adverse to taking on any risks that might add to their bailout costs.
Yet as Fed Governor Elizabeth Duke said in a speech Friday,
“policymakers should at least consider policies that take into account the role the GSEs could play in hastening the healing of the housing market rather than focusing entirely on minimizing losses to the GSEs.”
And New York Fed president William Dudley even brought up the possibility that Fannie and Freddie should be used more extensively to help reduce principal balances for underwater borrowers, a politically controversial suggestion.
“We have to recognize that there is more to economic policy than just monetary policy,” Dudley said as quoted in a Reuters article. “There are workable solutions to our housing problems at costs that I deem very reasonable relative to the economically inefficient path we are on.”
Filed under Interest Rate News, Mortgage, Mortgage Credit News, Mortgage News, fannie mae, federal reserve, underwater mortgages | No Comments »
Government Reserve Starting The Panic Of 2008
Posted on November 26th, 2011
With what looks like a coming collapse with the banking program and the Federal Reserve taking steps to make the scenario significantly worse, the Panic of 2008 seems to be just beginning. The cost of gold and oil maintain growing as inflation and interest rate manipulation are creating a flight of capital out of the US dollar. And with high foreclosure rates, a slowing economy, and rising costs, the American way of life for a lot of is turning increasingly depressing and desperate.
The run on Northern Rock bank in Great Britain, the short run on Countrywide, and now the collapse of Bear Stearns show how weak the banking program has truly turn out to be. Obviously, that’s also a reflection of how much doubt there’s about the mortgage crisis — banks are not lending to each other because they’re not able to gauge even their own exposure to the subprime mess.
Taking lessons from Enron in how you can securitize and hide debt was apparently not an excellent idea for big banks, as they now need to handle trillions of dollars of potentially bad debt. Even worse, no one can quite determine who owns this bad debt, or how to eliminate it.
But the Federal Reserve has stepped in to take care of even that dilemma, by offering to trade poor mortgage debt for Treasury securities. This deal is only for the largest banks in the country, so typical homeowners will not see any benefit from this self-defeating action by the central bank.
On the contrary, the typical American must see a continuation with the decrease in his regular of living. The central bank of the country is inflating the currency and destroying the value of the dollar, which will make it hard to afford even one of the most simple necessities, for instance food and energy.
Therefore, it ought to not be surprising that the prices of commodities are growing when it comes to devalued dollars. Oil and gold are just two of common measurements on the well being with the currency. Producing nations won’t desire to continue trading oil, essentially the most energy-dense fossil fuel, for worthless paper. As well as the price of gold has often been a reflection with the level of confidence in paper currency, which is why it has been suppressed for decades.
Now that the cost of gold has been escaped the control with the world’s central bank manipulators, though, the Federal Reserve is focusing on keeping up the appearance of economic health for so long as feasible. A recession is most likely the very best they can hope for, as opposed to an inflationary depression.
But the Fed is walking the path of inflation by lowering rates weekly and injecting basically cost-free funds into the banking method. For some cause, they don’t seem to grasp the truth that it was artificially low interest rates that helped grow the housing bubble to such heights. Fixing the issue of inflation with additional inflation just isn’t even a short-term band-aid, let alone a long-term answer.
It ought to not surprise incredibly a lot of folks that the bubble has now collapsed plus the project of suburbanizing America has slowed down drastically, even reversing in some areas. Developing houses dozens of miles away from any reliable source of energy, food, water, or gainful occupations was by no means sustainable as an business, but its tragic collapse has put several former homeowners who had been unable to stop foreclosure out into the street.
But even together with the slowing economy, loss of jobs, and high foreclosure rates, Americans are getting stolen from to bail out the significant banks that helped foster this environment. Immediately after all, it can be America’s place in the world to consume through debt the worthless goods of the rest of the world, and with out healthy banks to trap individuals into debt slavery, the entire system would need to uncover some sort of sustainable future not predicated on endless growth to finance interest payments towards the banks.
Regrettably, it truly is only a matter of time just before the circumstance goes absolutely out of control. The Federal Reserve, in an effort to stay away from the extreme lack of money through the Great Depression, seems to be going inside the just-as-extreme direction of hyperinflation skilled in Germany inside the early decades with the twentieth century. Except now, they’re performing it on a global scale by devaluing the dollar, which will hurt America more than any other country.
Filed under American Way Of Life, Bear Stearns, Collapse, Commodities, Continuation, Dilemma, Flight Of Capital, Foreclosure Rates, Government Reserve, Loan Modification, Mortgage Banks, Necessities, Real estate, Taking Steps, Treasury Securities, Trillions, Typical American, Typical Homeowners, Way Of Life, bad debt, banking institutions, federal reserve, foreclosures, mortgage debt | No Comments »