Fed Chief's Opinions on Foreclosure Remedies Differ from Frank Bill Oponents

Congressional opposition to the Frank housing bill is coalescing around apparently dubious propositions ($). [Antonia Ferrier, spokeswoman for House Minority Whip Roy Blunt (R-MO)] also took aim at the [Rep. Barney] Frank proposal. "This bill perversely rewards those who borrowed more than they could afford — their monthly mortgage payments get reduced with the government footing the bill. How is that fair to the millions of Americans who worked hard and paid their mortgages on time? And who ends up holding the bag if all goes south? No surprise, the American taxpayer." Meanwhile, economist and Fed Chief Ben Bernanke provides an "expert" opinion: "High rates of delinquency and foreclosure can have substantial spillover effects on the housing market, the financial markets and the broader economy," [Federal Reserve Chairman Ben] Bernanke said Monday..."Therefore, doing what we can to avoid preventable foreclosures is not just in the interest of lenders and borrowers. It's in everybody's interest," he said. ... The current housing crises has clobbered some borrowers home prices dropped. That left them with mortgages that are bigger than the value of their home. When that's the primary problem, Bernanke said the best solution may be reducing the amount that the borrower owes on the loan or some other permanent modification to the loan. Fine. Helping distressed homeowners can help everyone. But surely we cannot stand in the way of the the almighty market! That would be disaster. Republican talking points obtained by Roll Call also suggested housing prices must fall further rather than be propped up by a new government program, an argument also made by [Sen. Richard Shelby (R-AL)] Shelby. "The correction in the housing market is a necessary reaction to a prolonged period of reckless lending and borrowing practices that helped take housing prices to levels that were simply unsustainable. For the market to stabilize, prices will need to return to levels that ordinary Americans can afford," the talking points read. Or not. Rising foreclosures add to the glut of unsold homes and that put more downward pressure on prices, aggravating the housing slump, he said. More rapid declines in house prices could have an "adverse impact" on the broader economy and the stability of the financial system, [Bernanke] said. Photo by Flickr user msabcmom used under a Creative Commons license
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