Transcripts

"Commentary"-How Best To Stop The Mortgage Mess

SUSIE GHARIB: Tonight's commentator says more needs to do be done to stop the current mortgage meltdown. He's Mark Zandi, chief economist at moodyseconomy.com.

MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: The economy is in recession. The key reason: the evaporating housing market and surging mortgage foreclosures. House prices have plunged a stunning 10 percent from their peak and millions of homeowners now owe more on their mortgage than their house is worth. With prices sure to fall further, homeowners are literally walking away from their mortgages and investors who own them are suffering massive losses.

The financial system is in disarray, impairing credit to all borrowers, bad and good. The Treasury Department has been working aggressively to shore up the sliding housing and mortgage markets. Their efforts to date, while well-intentioned are set to fail. They have brokered various deals between mortgage investors, servicers and borrowers to try to keep people in their homes. But given the differing incentives of all involved, and that the deals are voluntary, few homeowners are getting much relief. The administration is loath to do much more, however. It is against legislation currently in Congress to allow homeowners to go into a bankruptcy workout to reduce their mortgage balance or interest rate. It is against any plan and there are many in Washington, that uses taxpayer money to purchase mortgage loans or securities.

This, Secretary Paulson says, would be a bailout. Yes, it would be a bailout, but not of investors and homeowners. They are suffering hundreds of billions in losses and millions are losing homes. The bailout would be of taxpayers themselves, as the recession won't be short and mild. It will be long and severe. This is Mark Zandi.