Doubts Being Raised About Effectiveness Of Economic Stimulus Package
Only 11 days after the White House and House of Representatives agreed a $150bn (€100bn, £76bn) economic stimulus package for the US economy, a Senate version is expected to reach the floor of the chamber for a vote on Monday.
But lawmakers are questioning whether it will do more than send a message that Washington is trying to forestall a full-blown US recession.
Instead of borrowing to fund tax rebates , some suggest there should be a focus on tackling a worryingly high home foreclosure rate. "To the extent this economic crisis has a face: it's housing. And to the extent there's a face on the housing crisis, it's the foreclosure crisis," said Christopher Dodd, Senate banking committee chairman, last week.
In October, the administration assembled the Hope Now Alliance, a coalition of mortgage lenders, mortgage servicers and counsellors to help subprime homeowners refinance in order to stay in their homes.
While this was billed as an "aggressive, comprehensive plan", some Democrats say it is moving too slowly. Last week the non-profit Center for Responsible Lending claimed Hope Now would prevent foreclosures in only 3 per cent of the outstanding subprime mortgages with adjustable rates. It said foreclosures were outnumbering loan modifications by 13:1.
The Mortgage Bankers Association takes issue with the report, citing figures from rating agency Moody's that show that more than 50 per cent of borrowers with subprime adjustable rate mortgages due to reset in the first eight months of 2007 refinanced or otherwise paid off their loans prior to reset.
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Financial Times | Jeremy Grant | February 3, 2008 04:31 PM