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US mulls fresh steps to ease housing slump: Paulson
2008-01-07
US Treasury Secretary Henry Paulson warned Monday that the housing market's woes are far from over, but said the government was mulling further measures to minimize economic harm. Paulson said a housing correction had been "inevitable" following years of rocketing property prices, but stressed that the government wanted to find effective remedies to offset the housing downturn rather than providing quick fixes. The US housing market has been in decline for almost two years as property sales have slumped and prices have tumbled amid tightening credit, triggering wider economic uncertainty. "Our most immediate goal is to minimize the impact on the real economy," Paulson will say, according to excerpts of a speech the Treasury chief is due to deliver in New York later Monday, released in advance. "This will require patience as we thoughtfully evaluate next steps. Working through the current situation and getting the policy right is more important than getting the policy announced quickly," Paulson said. Some economists are speculating that the administration of US President George W. Bush may soon unveil a package of economic policies aimed at bolstering the US economy which is facing one of the worst housing meltdowns in decades. Tighter credit markets, falling bank profits and concerns about job growth have led some economists to predict the country could be on the cusp of a recession. "After years of unsustainable price appreciation and lax lending practices, a housing correction was inevitable and necessary," Paulson said. According to the excerpts released by the Treasury, Paulson will also underline that interest rates on 1.8 million subprime mortgage loans are due to reset higher in the next two years, raising the risk that more homeowners will be unable to pay their mortgage bills. Mounting home foreclosures, especially related to subprime loans offered to Americans with patchy credit records, have worsened the housing malaise. Paulson's hint that the government is considering fresh remedies to bolster the economy comes after the administration brokered a vast mortgage relief plan last month aimed at helping up to 1.2 million distressed homeowners at risk of foreclosure. The plan devised by US Treasury officials with major lenders and investors helps some struggling homeowners to refinance subprime adjustable-rate home loans or freeze a loan's current interest rates for five years. Paulson said the Treasury was paying close attention to how the relief plan was working, but he cautioned that the market and homeowners will likely have to weather ongoing pain for a little longer. "Let me be clear that no single policy action will undo the excesses of the last few years. President Bush and his administration recognize the risks we face, and the primary importance of keeping the economy as strong as possible as we weather this housing correction," Paulson said.
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