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Worries about the sorry state of the U.S. economy have officials from the Obama administration digging deep into their bag of tricks to stop the skid before it slips into a double-dip recession.
Their latest move was announced Sunday when Housing and Urban Development Secretary Shaun Donovan said the White House plans in the next few weeks to set up an emergency loan program for the unemployed and a government mortgage refinancing effort.
Despite all the monetary and fiscal firepower the U.S. Federal Reserve and the Treasury have deployed, economic growth has slowed to an agonizing pace. The slowdown has hit the housing market particularly hard, as evidenced by home sales that dropped to record lows in July.
Their latest move was announced Sunday when Housing and Urban Development Secretary Shaun Donovan said the White House plans in the next few weeks to set up an emergency loan program for the unemployed and a government mortgage refinancing effort.
Despite all the monetary and fiscal firepower the U.S. Federal Reserve and the Treasury have deployed, economic growth has slowed to an agonizing pace. The slowdown has hit the housing market particularly hard, as evidenced by home sales that dropped to record lows in July.
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"The July numbers were worse than we expected, worse than the general market expected, and we are concerned," Donovan said on CNN's "State of the Union" program. "That's why we are taking additional steps to move forward."
The administration will launch a Federal Housing Authority program to help borrowers who are struggling to pay their mortgages refinance their loans. Additionally, the government will start an emergency homeowners' loan program for unemployed borrowers so they can stay in their homes, Donovan said.
"We're going to continue to make sure folks have access to home ownership," he said.
Cheaper prices and record low mortgage rates have failed to revive the moribund housing market. Sales of new homes in the U.S. unexpectedly fell to an annual pace of 276,000, the weakest since the data began in 1963. Sales of existing houses plunged by a record 27% in July as the effects of a government tax credit faded.
Figures from the National Association of Realtors last week showed home sales plunged to a 3.83 million annual pace, the lowest in a decade and worse than the most pessimistic forecast of economists surveyed by Bloomberg News. Demand for single-family houses dropped to a 15-year low and the number of homes on the market ballooned to 12.5 months as record foreclosures added to the problem.
U.S. home prices fell 1.6% in the second quarter from a year earlier, following a 3.2% decline in the first quarter, the Federal Housing Finance Agency said last week in a report.
The Obama administration also is mulling over whether to push for another homebuyer tax credit, but it hasn't come to a decision Donovan said. The $8,000 homebuyer's tax credit pushed sales forward as homebuyers rushed to qualify before the measure expired April 30.
"All I can tell you is that we are watching very carefully," Donovan said. "We're going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers."
Meanwhile, the weakening economy was the dominant topic at the Federal Reserve's annual conference in Jackson Hole, Wyoming. In a speech to central bankers and economists, Federal Reserve Chairman Ben Bernanke said the central bank "will do all that it can" to keep the recovery going.
The pressure for further action may increase this week as data on hiring, manufacturing and household purchases are expected to show that the economy cooled further in August.
The prospect of a renewed effort to drive down already super-low borrowing costs is raising questions about whether the central bank's actions can sustain the faltering recovery.
There is growing sentiment both inside and outside the central bank about whether the risks of big Treasury bond purchases outweigh the benefits.
"There's now a cost-benefit analysis for future actions which I'd contrast with the 'whatever it takes' philosophy of the crisis," Stanford University Professor John Taylor, creator of an interest-rate formula used by central banks, said in a Bloomberg interview. "The benefits of additional quantitative easing are quite small."
A lack of jobs and slack consumer demand are the biggest threats to the economic recovery. But unemployment, currently hovering at 9.5%, shows no sign of coming down and manufacturing, which had led the recovery, appears to be running out of steam.
"We've got to do something different because what they did before hasn't worked," Allen Sinai, chief global economist at Decision Economics, told Reuters at the Jackson Hole event.
Even Bernanke raised caution flags about the effectiveness of further action from the Fed, saying in his Aug. 27 speech that the Fed alone can't keep the recovery going.
"Strong and stable" growth will "require appropriate and effective responses from economic policy makers across a wide spectrum" as well as private-sector leaders, he said.
News & Related Story Links:
The administration will launch a Federal Housing Authority program to help borrowers who are struggling to pay their mortgages refinance their loans. Additionally, the government will start an emergency homeowners' loan program for unemployed borrowers so they can stay in their homes, Donovan said.
"We're going to continue to make sure folks have access to home ownership," he said.
Cheaper prices and record low mortgage rates have failed to revive the moribund housing market. Sales of new homes in the U.S. unexpectedly fell to an annual pace of 276,000, the weakest since the data began in 1963. Sales of existing houses plunged by a record 27% in July as the effects of a government tax credit faded.
Figures from the National Association of Realtors last week showed home sales plunged to a 3.83 million annual pace, the lowest in a decade and worse than the most pessimistic forecast of economists surveyed by Bloomberg News. Demand for single-family houses dropped to a 15-year low and the number of homes on the market ballooned to 12.5 months as record foreclosures added to the problem.
U.S. home prices fell 1.6% in the second quarter from a year earlier, following a 3.2% decline in the first quarter, the Federal Housing Finance Agency said last week in a report.
The Obama administration also is mulling over whether to push for another homebuyer tax credit, but it hasn't come to a decision Donovan said. The $8,000 homebuyer's tax credit pushed sales forward as homebuyers rushed to qualify before the measure expired April 30.
"All I can tell you is that we are watching very carefully," Donovan said. "We're going to be focused like a laser on where the housing market is moving going forward, and we are going to go everywhere we can to make sure this market stabilizes and recovers."
Meanwhile, the weakening economy was the dominant topic at the Federal Reserve's annual conference in Jackson Hole, Wyoming. In a speech to central bankers and economists, Federal Reserve Chairman Ben Bernanke said the central bank "will do all that it can" to keep the recovery going.
The pressure for further action may increase this week as data on hiring, manufacturing and household purchases are expected to show that the economy cooled further in August.
The prospect of a renewed effort to drive down already super-low borrowing costs is raising questions about whether the central bank's actions can sustain the faltering recovery.
There is growing sentiment both inside and outside the central bank about whether the risks of big Treasury bond purchases outweigh the benefits.
"There's now a cost-benefit analysis for future actions which I'd contrast with the 'whatever it takes' philosophy of the crisis," Stanford University Professor John Taylor, creator of an interest-rate formula used by central banks, said in a Bloomberg interview. "The benefits of additional quantitative easing are quite small."
A lack of jobs and slack consumer demand are the biggest threats to the economic recovery. But unemployment, currently hovering at 9.5%, shows no sign of coming down and manufacturing, which had led the recovery, appears to be running out of steam.
"We've got to do something different because what they did before hasn't worked," Allen Sinai, chief global economist at Decision Economics, told Reuters at the Jackson Hole event.
Even Bernanke raised caution flags about the effectiveness of further action from the Fed, saying in his Aug. 27 speech that the Fed alone can't keep the recovery going.
"Strong and stable" growth will "require appropriate and effective responses from economic policy makers across a wide spectrum" as well as private-sector leaders, he said.
News & Related Story Links:
- CNN.com:
State of the Union - Money Morning:
Moribund Housing Market Threatens to Kill Economic Recovery - Bloomberg:
Obama Administration Plans Mortgage Aid, HUD's Donovan Says - Bloomberg:
Bernanke Faces Skepticism on Monetary-Policy Tools - Reuters:
The uncomfortable mathematics of monetary policy - Money Morning:
There's Reason to be Pessimistic about the U.S. Economy, but Never Panic
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Tags: Double-Dip Recession, Economic Growth, Housing Market, Obama Administration, Stimulus Package, U.S. Economy
Huh? I had to look at the top of the article to see if the date is really correct or if this is a story from a year or two ago. What happened to the other programs that were supposed to "help borrowers that are struggling to make their mortgages." Blah, blah, blah. Same crap, different day. Is this just another "program" for my government leaders to waste my tax dollars with? What makes them think that they can manage a program correctly and that we will see results? Right now our government is my definition of insanity. Do the same thing over and over and expect different results. Let's try something new, manage it correctly for once and make sure it works!
Why don't we start heavily taxing those businesses that send jobs overseas. So the businesses don't gain from taking jobs from Americans. Heavily tax those large banks that can afford to give bonuses. Someone is definently wacked. This tax process tax Americans for being Americans. It should tax Americans for being un-American.
I agree with Mike, why continue digging the hole if there are no results. Send the money to the people. Let them get the collapsing mortgage companies back on their feet by being able to get ahead to pay their mortgages.
Get an American in office. Someone who knows and cares what our founding fathers did to make the country great. And isn't constantly trying to alter it to feed the rich.
won't they pay heed (obviously not) to the old wisdom that problems are not fixed by throwing money at them???
Why is it so hard for the Govt to figure out financial plans that will work. Govt doesn't even realize that their mortgage recovery plans aren't doing anything but help the Banks and other Lenders. There is no reason for the financial institutions to start fixing this when Govt is handing them more free money. The housing market is just as artificial as when this all started. If Banks keep letting the housing market fall it will just allow them to come in and restructure what ever remaining bad debt there is and buy low and start bringing the housing market back for big profits. Remember Govt bought a lot of their toxic debt and are still subsidizing them with these mortgage plans. Which brings us to Fannie & Freddie, Govt doesn't have the ability to truly liquidate debt unless they just write it off. So Govt has no way to clean up F&F on their own. Here's what you do..you barter regulations on Wall Street for F&F debt. Wall Street can get rid of the debt for Govt by putting it back in the system and in return Govt loosens up on certain regulations to allow Wall Street to make money. Not forever but for a set time. This way they can make up for the billions in debt they will have to eat in some capacity and the rest can be bundled into positive derivatives. There is such a thing ad positive derivatives.