What is happening in the world when President Reagan’s former Chairman of the Council of Economic Advisors Martin Feldstein is talking more sense about the mortgage crisis in the country than the Democratic President or anyone in his administration?
Feldstein has a must read Op Ed in today’s New York Times entitled “How to Stop the Drop in Home Values.”
He is right in just about everything he says, including: “Homes are the primary form of wealth for most Americans. Since the housing bubble burst in 2006, the wealth of American homeowners has fallen by some $9 trillion, or nearly 40 percent. In the 12 months ending in June, house values fell by more than $1 trillion, or 8 percent. That sharp fall in wealth means less consumer spending, leading to less business production and fewer jobs.”
That’s not all: “Nearly 15 million homeowners owe more than their homes are worth; in this group, about half the mortgages exceed the home value by more than 30 percent.”
He also concisely pinpoints why the Obama administration has failed at trying to address this problem (giving them the benefit of the doubt that they ever really intended to: “The Obama administration has tried a variety of programs to reduce monthly interest payments. Those programs failed because they didn’t address the real problem: the size of the mortgage exceeds the value of the home.”
He also offers a specific plan, parts of which I and others might disagree with, but it is serious, thoughtful and deserves fast and active consideration by the President and all elected officials who claim to want to get our economy going again.
Something must be done. Indeed, it is way past time that something meaningful be done about the mortgage and foreclosures crisis devastating large parts of our country. As Mr. Feldstein concludes, “The fall in house prices is not just a decline in wealth but a decline that depresses consumer spending, making the economy weaker and the loss of jobs much greater. We all have a stake in preventing that.”