Bush unveils new housing policies
Friday, 31 Aug 2007 20:14
George Bush to address problems in the sub-prime mortgage market
George Bush has unveiled a series of measures designed at combating ongoing problems in the United States' housing market, which have prompted global stocks to fluctuate wildly over recent weeks.
In his first public step to address the credit crisis the American president promised to reform key housing provisions of the federal tax code and to make it easier for homeowners to refinance their mortgages.
But he stopped short of announcing what he dubbed a "federal bailout" as he explained this would "only encourage a recurrence of the problem".
Mr Bush also admitted that "excesses" in the sub-prime market had placed "particular strain" upon the US economy.
Lenders in the sector provide higher risk home loans to those with poor credit ratings or low incomes, but increasing numbers of American borrowers have been unable to meet their mortgage payments as a result of rising interest rates in the country.
Markets across the globe have been rocked as a result, with traders wary that the credit crunch in the sub-prime market could spread to the wider economy.
A number of major banks are thought to be exposed to investments in the US housing sector and it is anticipated that they will be less willing to make credit available, to both consumers and companies involved in merger and acquisition activity, if they make losses due to the problems in the property market.
However some analysts are warning that the market turbulence may continue for some time as the extent to which sub-prime debt sold on by the world's financial institutions is still emerging.
Mr Bush today insisted that economical growth in the US was "healthy", despite the tremors in international markets.
"Wages are rising, unemployment is low, exports are up, and steady job creation continues," he claimed, although he acknowledged that markets were in a "period of transition".
"This process has been unfolding for some time, and it's going to take more time to fully play out. As it does, America's overall economy will remain strong enough to weather any turbulence," Mr Bush continued.
The president's comments followed remarks from Federal Reserve chief Ben Bernanke that hinted a cut to interest rates stateside could be imminent.
"Well-functioning financial markets are essential for a prosperous economy. As the nation's central bank, the Federal Reserve seeks to promote general financial stability and to help to ensure that financial markets function in an orderly manner," Mr Bernanke outlined.
"It is not the responsibility of the Federal Reserve – nor would it be appropriate – to protect lenders and investors from the consequences of their financial decisions. But developments in financial markets can have broad economic effects felt by many outside the markets, and the Federal Reserve must take those effects into account when determining policy."