The Treasury Finally Looks To The Real Problem (FNM)(FRE)

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Now that the Fed, Treasury, and Congress have set up plans to bailout everything from banks to car companies to bicycle shops, Treasury Secretary Henry Paulson has decided to turn his attention to the root of all evil–housing.

The argument has been made, and made compellingly, that as long as home prices keep dropping the broader economy cannot recover. Dropping values mean more damage to bank balance sheets and the consumer’s ability to get back his credit sea legs.

According to The Wall Street Journal, "The Treasury Department is considering a plan to revitalize the U.S. housing market by reducing mortgage rates for new loans." Rates would drop as low as 4.5% by using Fannie Mae (FNM) and Freddie Mac (FRE) to push up the capital available for home loans.

Now, if the government can actually make a decision to pull the trigger on the program, it may help the economy before the The Hundred Year Recession gets into full swing.

Douglas A. McIntyre