Landmark Housing Rescue Legislation Is Building
Monday, May 19, 2008SUSIE GHARIB: Two top Senate lawmakers said late today they have a deal on a housing rescue bill. The chairman of the Senate Banking Committee, Christopher Dodd and the committee's ranking Republican, Richard Shelby, agreed on a landmark housing assistance bill. The legislation is aimed at preventing foreclosures and creating more affordable housing. It also calls for a new regulator for government-sponsored enterprises Fannie Mae and Freddie Mac. The senators say key to the plan is a fund to buy distressed properties, which will be paid by Fannie Mae and Freddie Mac, not taxpayers.
Well, while a deal to help troubled homeowners is in the works on Capitol Hill, the outlook for the economy remains cloudy. Some economists see signs of improvement, but the National Association for Business Economics today cut its forecast for economic growth. Stephanie Dhue looks at how the economy is shaping up.
STEPHANIE DHUE, NIGHTLY BUSINESS REPORT CORRESPONDENT: Meeting today with Treasury Secretary Henry Paulson, President Bush said the U.S. is working through tough times. But he dismissed the idea of a second stimulus plan, saying the current tax rebate checks should help weather the storm.
GEORGE W. BUSH, PRESIDENT OF THE UNITED STATES: It should help our economy and more importantly, help people pay their bills. And we hope people use that money and take care of their families and shop.
DHUE: Economists agree that the stimulus checks should help boost economic growth in the third quarter. A new survey of business economists says the worst of the credit crunch is over and the housing slump is nearing an end. Lynn Reaser of Bank of America helped put the survey together. She thinks the economy is turning toward a gradual saucer-shaped recovery.
LYNN REASER, ECONOMIST, BANK OF AMERICA: The general forecast is that this will be the worst quarter in the cycle in terms of the slowing growth pattern and that credit markets will slowly start to improve and that housing is in the process of bottoming out, although it may take a number of months for that bottom to be clearly established.
DHUE: But the stimulus checks may distort the view a bit. Nigel Gault of Global Insight thinks the economic recovery will look more like a "W," rising as consumers spend their checks and falling after the money's gone.
NIGEL GAULT, ECONOMIST, GLOBAL INSIGHT: The question's going to be when we look at the third quarter, if the numbers are showing an improvement in growth, we're going to have to try and disentangle whether this is the start of the real recovery? Is this the start of a sustained upturn or are we indeed just in the middle part of this "W" that we're expecting to see?
DHUE: Still, some economists see the combination of declining home prices, higher oil prices and shaky credit markets taking a bigger toll on the economy. AEI's Desmond Lachman says the odds are good for a more prolonged economic downturn.
DESMOND LACHMAN, ECONOMIST, AEI: Any one of those factors would be enough to cause the U.S. economy trouble. Why, if we've got three of those factors working together and the magnitude of the shocks being so large, why is this going to be just an ordinary recession?
DHUE: The shape of an economic recovery depends on a lot of unknowns, including whether rising food, energy and commodity prices raise inflation overall. Stephanie Dhue, NIGHTLY BUSINESS REPORT, Washington.
