They're panicking. It's an expensive short-term fix, nothing more.
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Paulson Says Deal `Very Close' With Congress on Housing Bill
By John Brinsley and Vivien Lou Chen
March 8 (Bloomberg) -- Treasury Secretary Henry Paulson said the Bush
administration is nearing agreement with Congress on a bill that would
make more Federal Housing Administration loans available to borrowers
facing foreclosure.
``They're very close to getting a compromise that would be very
im****tant,'' Paulson told re****ters yesterday in Sunnyvale,
California. ``One of the things I did from out here was make a couple
of calls to leaders in Congress just to talk about it. We're very
close.''
The Senate in December passed a bill similar to one passed by the
House three months earlier that would lower the down payment required
of low- and middle-income home buyers for federally insured loans, and
also let them borrow more money. In addition, homeowners with
adjustable-rate loans due to reset would have an easier time getting
FHA-backed loans.
The Bush administration has expressed concerns about the legislation,
saying the House version doesn't give the FHA enough flexibility to
charge higher premiums to homeowners who pose credit risks. Higher FHA
charges could add $75 million to federal revenue, the Office of
Management and Budget said in September.
``We're going to need this FHA modernization bill,'' Paulson said,
adding the bill would help 300,000 people. He spent the past two days
in California, which has the most number of homes acquired last month
by lenders through foreclosure of any U.S. state.
Foreclosures rose to a record in the fourth quarter, the Mortgage
Bankers Association said two days ago. Paulson said the government is
encouraging lenders and borrowers to work together to prevent people
from losing their homes.
OTS Proposal
Paulson has declined to endorse a proposal by Office of Thrift
Supervision Director John Reich to have the FHA refinance loans for
homeowners whose houses are worth less than they owe on their
mortgages. Reich's plan was backed this week by Federal Reserve
Chairman Ben S. Bernanke, and is also sup****ted by House Financial
Services Committee Chairman Barney Frank.
Paulson's comments in California came after a government re****t showed
the U.S. unexpectedly lost 63,000 jobs in February, after a drop of
22,000 in January.
Paulson said the loss of jobs signals a ``tough'' quarter for growth,
while stopping short of saying the economy has entered a recession.
The February jobs re****t was ``not welcome news, not good news,''
Paulson said in a press conference in East Palo Alto, California.
``This is a tough quarter, we knew it.''
Fed's Measures
Minutes before the Labor Department re****t was released, the Federal
Reserve moved to add as much as $200 billion to the banking system
over the next month in an attempt to alleviate the threat from banks
reducing cor****ate and consumer lending.
``I'm very sup****tive of the Fed's action,'' Paulson said. ``They've
taken a number of innovative steps'' and ``it's really what the market
needs.''
In a speech last night at Stanford University, Paulson said housing
remains the biggest downside risk to the economy that will ``take some
time to work out.'' He also expressed confidence that the U.S. dollar
will over time reflect the fundamentals of the economy.
The U.S. dollar dropped for a fourth straight week against the euro.
``I know how im****tant a strong dollar is, and it's in our nation's
interest,'' Paulson said. ``We're facing some challenges right now but
the long-term fundamentals are strong, and I'm confident they'll be
reflected in our currency market.''
To contact the re****ter on this story: Vivien Lou Chen in Stanford,
California, at vchen1@[EMAIL PROTECTED]
Updated: March 8, 2008 00:01 EST
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