The day begins with a report from the Conference Board showing consumer confidence falling back into recessionary lows. The Case-Shiller index shows housing prices remain flat, including some slippage in Seattle. Against this backdrop, the administration’s latest mortgage-relief effort, which might help 1 million homeowners refinance, is still small ball.
The Washington Post’s Zachary Goldfarb had a fascinating story about the Obama team’s internal debate over how and how much to help homeowners. Initial promises to help 9 million never materialized. Of the $50 billion in relief initially considered, only $2.4 billion has been spent.
Joseph Gagnon at the Peterson Institute for International Economics suggests that “the last bullet” available to the Federal Reserve is to do a massive purchase of mortgage-backed securities in an effort to revive the housing market.
But I’m not sure that would do more than further the games of the Wall Street playerz. Too much damage has been done. Too many average Americans are financially ruined and lack even the modest means to take advantage of relief.
The bigger question is why the U.S. economy was allowed to become so dependent on housing, from over-employment in construction sectors and the mortgage orgy, to the use of the house as a piggy bank by “owners.” The bubble cloaked decades of stagnant wages and deindustrialization’s loss of good jobs. When it popped, the unemployment and debt overhang will take years to work off. Moving beyond this dependence is more important than symbolic gestures that are three years too late anyway.
And Don’t Miss: My plan to save the Eurozone || George Soros/Financial Times
Today’s Econ Haiku:
Is the rally real?
What does rally really mean
With a flat decade?