“Let me be clear: I oppose any bailout,” said U.S. Treasury Secretary Henry Paulson this morning before the National Association of Business Economists.
Did I read that correctly? It sounds like Paulson may be OK with the market solving this problem.
It makes those of us who believe Larry Kudlow’s creed – I believe that free market capitalism is the best path to prosperity – pretty happy.
Still, even if Secretary Paulson feels this way, it doesn’t mean Congress won’t try to fix things.
A few points to note: 93 percent of homeowners pay their mortgages on time every month and only 2 percent of homeowners are facing foreclosure, per Secretary Paulson this morning.
So while this is a crisis, we can take some solace in knowing that most households remain stable.
Secretary Paulson spoke of two other conclusions – 1) that solving the mortgage crisis is the joint responsibility of industry, government and homeowners. And 2) talk of homeowners facing foreclosure is often combined with discussions of homeowners who are upside down in their mortgages. That is, their mortgages are higher than their home values. He said while this is a dilemma, it does not mean that those homeowners will necessarily lose their homes.
He’s right – home values will continue to change and at some point should turn around positively again. If people can continue making their mortgage payments on their current loans they should be OK.
To see the full text of Secretary Paulson’s speech, visit the U.S. Department of the Treasury’s Web site: http://www.treas.gov/press/releases/hp856.htm
March 3, 2008.