Mark Winston Griffith

The Fed Wakes up to Subprime Realities

With the health of the economy teetering like a house of cards, Fed Chairman Ben Bernanke has begun to stake out a tougher anti-foreclosure position than Mr. Ownership Society himself, President Bush. Looming before Bernanke and the nation's economy is the fact that plunging home values could make it more difficult for homeowners to dig their way out of subprime mortgage debt and avoid foreclosure.

Suggesting that the federal government will have to go further than merely looking for mortgage lenders to voluntarily make loan modifications, a plan that falls woefully short of the subprime meltdown challenge, the fed chairman looked towards the FHA, Freddie Mac, Fannie Mae and the mortgage lenders themselves to offer more options to homeowners in distress This is how the New York Times reported it yesterday:

"Though Mr. Bernanke stopped well short of calling for a government bailout, he used his bully pulpit to try to push the banking industry into forgiving portions of many mortgages and signaled his concern that market forces would not be enough to prevent a broader economic calamity.

He also suggested that the Federal Housing Administration expand its insurance program to let more people switch from expensive subprime mortgages to federally insured loans.

And he urged the two government-sponsored mortgage companies, Fannie Mae and Freddie Mac, to raise more capital so they could buy more mortgages. The companies already guarantee or hold as investments about $1.5 trillion in mortgages. "

With every passing day, the pressure mounts for the Bush Administration to get real about America's foreclosure crisis.

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Posted at 6:26 AM, Mar 06, 2008 in
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