Bernanke pushes government help to curb foreclosures

[lonestarnot]

http://www.latimes.com/business/la-fi-fed6-2008may06,0,5830243.story

The Fed chairman says failure to act could destabilize communities, reduce property values and lower tax revenues.
By Peter G. Gosselin, Los Angeles Times Staff Writer
May 6, 2008
WASHINGTON -- As the House prepared to take aggressive steps to stem the wave of home foreclosures, Federal Reserve Chairman Ben S. Bernanke on Monday night endorsed the need for government intervention, saying that letting markets take their own course could "destabilize communities, reduce the property values of nearby homes and lower municipal tax revenues."

In a speech in New York, the central bank chairman reiterated his controversial call for lenders and mortgage service companies to consider cutting the principal of some customers' loans to prevent foreclosure.



Blog: L.A. real estate market"When the source of the problem is a decline of the value of the home well below the mortgage's principal balance, the best solution may be a write-down, perhaps combined with" a government-orchestrated refinancing, Bernanke told a Columbia Business School audience.

regh regh regh write down regh

[shain from kane]

1. It can happen, and still those capitalist principles will remain intact.

[KSinTX]

2. Shouldn't that government intervention be state & local?

The rest of the country isn't going into a tailspin because of market insanity so why should it get caught up in any sort of bailout? FL, CA, NY, NV allowed the speculation to occur. Here in TX, for example, it was creatively thwarted through tax penalties so the housing crunch pretty well bypassed the state. Several other states were equally good at projecting this eventuality and protecting its citizens. States that didn't should shoulder the burden.

[edhopper]

3. Homes are ridiculously overpriced

Way higher the the historic norms where they are affordable to most working Americans. It's basic Econ 101 that they will return to the mean or not sell. If the Government tries to prop up these Bubble prices they will be depriving millions of people from the chance to buy a home, while rewarding people who made bad choices (buying in a bubble market) That is the Moral Hazard and it never ends well when you screw with it. Home prices need to fall 40% to 60% for the market to equalize.

[PghTiny]

4. Let the housing prices crash!

There's going to be a lot of pain, but there will be more pain by propping up these bubble prices. I can't even afford a place in cracktown because the prices are so out of whack in my area (DC exurbs, where the entire market has just started to deflate from the current RE bubble).