Finance time

Former Treasury Secretary Robert Rubin called for quick government action to tackle the rising level of home foreclosures and he indicated taxpayer money will have to be used.

“There is a strong need for urgent action,'' Rubin, who is chairman of Citigroup Inc.'s executive committee, said. “I would be very, very seriously considering the possibility of using public funds in one form or another.''

The Federal Housing Administration should be involved in any stepped-up government effort to help homeowners facing the loss of their houses, Rubin said an interview on Bloomberg Television's “Political Capital with Al Hunt,'' to be aired today. “The piece that's missing now, at least in my judgment, is addressing all of these mortgages that face foreclosure.''

U.S. home-foreclosure filings jumped 60 percent and bank seizures more than doubled in February as rates on adjustable mortgages rose and property owners were unable to sell or refinance amid falling prices. The biggest housing slump in a generation, compounded by tighter credit and mounting financial losses, is spilling over to other industries and pushing the broader economy toward a recession.

Democratic lawmakers, including House Financial Services Committee Chairman Barney Frank of Massachusetts and Senate Banking Committee Chairman Chris Dodd of Connecticut, have put forward a plan to have the FHA insure refinanced mortgages after lenders reduce principal to help struggling borrowers. The Bush administration is resisting the proposal.

Rising Foreclosures

Rubin, 69, said the rising level of foreclosures is at the heart of the credit crunch cash advance usa low fee cash advance. The world's biggest banks and securities firms have reported $195 billion in asset writedowns and credit losses since 2007 stemming from the collapse of the U.S. subprime mortgage market.

“The credit markets themselves are really in uncharted waters,'' Rubin said. “A lot of trouble could lie ahead.''

He praised the Federal Reserve for the steps it has taken to help the economy and to ease strains in the financial markets.

“The Fed has done a very good job,'' he said. “The Treasury, working with the Fed, did the right thing conceptually in rescuing Bear Stearns.''

The Fed is providing $30 billion to JPMorgan Chase & Co. to help finance the purchase of Bear Stearns Cos. after a run on Wall Street's fifth-largest securities company. It has also expanded its lending program to include big Wall Street securities firms as well as banks in a bid to stop the crisis.

Rubin said that securities companies should be subject to the same regulation as banks now that it's become clear that they will get the same government support. Frank on March 20 called for creation of a super agency to monitor risk across markets.

Rubin shied away from saying that the U.S. has already entered into a recession. He saw, though, a 1-in-3 chance that the economy could be in for a deep, prolonged contraction.

“As a policy maker, those risks are high enough so that you would be highly proactive in seeking ways to reduce the risk,'' he said.

Source

Filed under: money by John