No simple solution for housing "excesses"

Paulson: No simple solution to housing crisis

Excerpt:

Paulson, in remarks prepared for a New York speech, said that the country was facing an unprecedented wave of 1.8 million subprime mortgages which are scheduled to reset to sharply higher rates over the next two years. He said this raised the possibility of a market failure and was the reason the administration brokered a deal with the mortgage industry to freeze certain subprime mortgage rates for five years to allow the housing market to recover.

"By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy," Paulson said in excerpts of his speech released by Treasury. "However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years."

Paulson said that the deal the administration brokered with the industry to freeze certain subprime mortgage rates for five years did not involve the use of any taxpayer money. Conservative critics have complained that the administration's plan represented government intrusion in the operation of markets that would end up rewarding some people who had taken out risky mortgages.


Comment: The market will correct itself but it will be painful for home sellers!