bentleyWIRE | blogged

Good or bad for the housing recovery?

They did the right thing to remove "uncertainty" about Fannie/Freddie from the markets.  At this point, it's crucial for the Treas Sec to be both assertive and proactive.  Investor Psychology 101.  In the long run, it will lower mortgage costs and improve housing affordability further leading to a reduction in home inventories.  Home values will stabilize and that's a great start.  Even so, it will get worse before better.  Foreclosures will continue to be a runaway freight train pressuring home values downward in a protracted downcycle.  It would have been considerably worse w/out the bailout.  Certainly not a cure-all, but an integral piece of a broad strategy to catalyze the housing recovery.  BTW, it is taxpayer money.  However, I'm on board w/ Paulson in that it could and will prove profitable.  Uncle Sam will be senior preferred equity stakeholders.  When all stabilizes and returns to profitability, we'll make out just fine.  I'd say it's a better use of taxpayer money than throwing it down all the other sinkholes that our gov't has created (I'm sure we can all think of a few).  At least this plan has the possibility of gain.