"Zandi On Distressed Homeowners: ‘Their Problems Are Clearly Everyone’s Problems’"
Today, Mark Zandi, chief economist of Moody’s Economy.com, released his analysis of the stimulus plan House Democrats put forth last week. Zandi concluded that the plan “will not reverse the current recession, but it will provide a vital boost to the flagging economy”:
With the stimulus, there will be 4 million more jobs and the jobless rate will be more than 2 percentage points lower by the end of 2010 than without any fiscal stimulus. Without stimulus, unemployment will rise well into the double digits by this time next year, and the economy will not return to full employment until 2014.
Zandi also highlighted an important point that has been somewhat lost in the hoopla surrounding the stimulus: a solution to the housing crisis — the very root of the economic downturn — has still not been found. Data shows that foreclosures in 2008 increased 80 percent from 2007 and 225 percent from 2006. Zandi rightly noted that these problems facing homeowners “are clearly everyone’s problems“:
[P]olicymakers’ most serious missteps so far have come from acting too slowly, too timidly, and in a seemingly scattershot way…Debate about whether it is fair to help stressed households stay in their homes appears quaint. Their problems are clearly everyone’s problems. Only concerted, comprehensive and consistent government action will instill the confidence necessary to restore financial stability and restart economic growth.
Indeed, the foreclosure epidemic hurts everybody, as foreclosed properties drag down home values, making it harder for neighbors to sell or refinance, which could result in even more foreclosures.
Zandi suggested that money from the Troubled Asset Relief Program (TARP) be used “to fund a much larger and more comprehensive foreclosure mitigation plan.” This is an approach long-advocated by the Center for American Progress, and since the Senate voted last week to release the second tranche of TARP funds into the waiting arms of the Obama administration, there is a golden opportunity to implement it.