Tags: Galbraith | housing | crisis | foreclosures

Galbraith Skeptical of Obama Housing Efforts

By    |   Tuesday, 25 Oct 2011 08:37 AM

The Obama administration is announcing a new housing program to help people whose home values have dropped.

But University of Texas professor James Galbraith is doubtful the program will do much to ease the housing crisis.

“The government has announced a number of measures, but is not willing to implement anything like the degree promised,” he tells Yahoo. “The Treasury Department basically has been unwilling to put pressure on the banking system to recognize losses on all the bad mortgages.”

Households have to deleverage, and their No. 1 choice will probably be to walk away from their mortgages, Galbraith says.

So what should the government do? First, it needs to get rid of fraudulent mortgages, he says.

“To the extent that people can be relieved of the burden of paying mortgages they never should have contracted in the first place, that would be useful.”

In addition, people should be given the right to rent houses that have been foreclosed and the right to purchase them back later, Galbraith says. That would keep houses from being abandoned and give banks at least some of their money back.

Former White House economist Larry Summers says that perhaps the biggest housing problem now is that credit standards for eager buyers are too high.

“This reduces demand for houses, lowering prices and driving increases in foreclosures, leading to further tightening of credit standards and a vicious growth-destroying cycle,” he writes in the Financial Times.



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The Obama administration is announcing a new housing program to help people whose home values have dropped. But University of Texas professor James Galbraith is doubtful the program will do much to ease the housing crisis. The government has announced a number of...
Galbraith,housing,crisis,foreclosures
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Tuesday, 25 Oct 2011 08:37 AM
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