Wall Street Breakfast: Must-Know News
Feb 13, 2009 - 7:19 AM EST
- Obama considers mortgage subsidies. Obama is working on a new plan to stem foreclosures using mortgage subsidies. In a major departure from existing programs, the initiative would aim to help homeowners before they fall behind on their payments. Sources say the plan, which is still evolving, would see homes undergo a standardized reappraisal and then homeowners would face a uniform eligibility test. The administration may also lower the threshold for relief eligibility; currently, loans are reworked if borrowers spends more than 38% of their gross income on mortgage payments.
- Weeding out the failed banks. A growing body of research by economists and finance experts suggests some of the country's largest banks are essentially insolvent and the banking system will need significantly more aid. Without a cure for the problem of bad assets, the credit crisis dragging down the economy will continue. The answer, according to these economists and experts, is a much larger and more direct government role than the one outlined by Treasury this week. Instead of a private-public investment fund, the government needs to roll up its sleeves, get rid of the weakest banks, sell off bad assets and pour money into the surviving banks. The researchers point to the success of similar plans in Japan and Sweden, and in the U.S. during the savings and loan crisis.
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Source: Seeking Alpha (Feb 13, 2009 - 7:19 AM EST)
