Housing bill passes in House
Nic Retsinas, director of Harvard University's Joint Center for Housing Studies.
TEXT OF INTERVIEW
Kai Ryssdal: Today, the White House announced that the president's changed his mind. He is going to sign the housing bill Congress has been working on after all.
Treasury Secretary Henry Paulson said this morning he convinced the president to set aside his objections and focus on the bailout for Fannie Mae and Freddie Mac instead. The House passed the bill this afternoon, the Senate probably tomorrow.
So now that it looks like the rescue package is going to happen, we thought it'd be smart to figure out what's going to happen in the housing market as a result.
For that, we've called Nic Retsinas at Harvard's Joint Center for Housing Studies.
Mr. Retsinas, good to have you with us.
Nic Retsinas: Nice to be with you.
Ryssdal: Summarize your thoughts on this bill for me, would you?
Retsinas: It was a better idea six months ago. It will help. It won't hurt. It's certainly better than chicken soup in terms of the housing market. It's not going to do any damage to the housing market. I think at best, which is not a bad thing, this should soften and slow down some of the continuing problems in the market. Whether it helps with a rapid recovery, that I'm a little more skeptical of.
Ryssdal: Let me ask you about some of the things the President specifically mentioned when he stated his opposition to this bill. The first is that $4 billion worth of Community Block Grants to buy up foreclosed properties. Now that that's going to actually be spent, is that going to change the market?
Retsinas: Well, it'll change in a couple different ways. One of the fundamental problems in the housing market is we have too many homes for sale. Every time a property is foreclosed, that adds one more home to the inventory. If and when this legislation becomes law, state and local governments can use these funds to acquire these properties. At the least, it'll start to eat at some of that inventory overhang in the marketplace.
Ryssdal: If I'm out there shopping for a mortgage in the next couple of months, is this bill going to make my mortgage any cheaper, lower the interest rates?
Retsinas: It won't lower the interest rate. It probably, depending if one, you have good credit and two, you do have a down payment, it will probably mean that there'll continue to be mortgage money available. So it'll probably prevent the mortgage rates from rising very much, but it's not really going to do anything to lower the mortgage rates.
Ryssdal: It's also got a provision for a new regulator for Fannie Mae and Freddie Mac, the two mortgage giants that have been in such trouble. What was wrong with the old one and why do we need a new one?
Retsinas: Well, that's been a debate for some time. Many people have agreed that having a strong regulator gives confidence to the marketplace. As we have seen over the last several weeks, investors are leery of whether Fannie Mae and Freddie Mac will fall prey to this sort of market. What the plan that has been put forward by Secretary Paulson and is likely to be in this bill says: "Not to worry. If that happens, the government will sort of step in." Having a good regulator, a strong regulator, is part and parcel of restoring confidence to these very importance institutions.
Ryssdal: And in fact, it was Treasury Secretary Paulson who said today that he convinced the President to sign this bill over the President's own objections. So now we have a package which will eventually become law that will let the Treasury Secretary decide when to invest in Fannie Mae and Freddie Mac, how much money to lend them. Is there no risk in the blank check that he's been given?
Retsinas: Of course there's a risk. Everything the government has done transfers some of the exposure of this sort of failing market to the taxpayer. I think the judgment call that's being exercised, and I think in this case it's a prudent one, that the avoidance of a much larger problem if nothing were done is much more worrisome. So the chance of some more activist intervention as opposed to waiting for the sky to fall on the housing market I think is probably a good choice.
Ryssdal: Is this going to stabilize the housing market as the White House said today?
Retsinas: Well, it's going to help. The larger issue in the housing market as I indicated is the glut of homes that are for sale, both overbuilt as well as foreclosed homes. We have to work that out. Both borrowers and investors have to have some confidence in the market and that it's not going to get worse. This is an effort to bring some stabilization to that market.
Ryssdal: Nic Retsinas runs the Joint Center on Housing Studies at Harvard University. We reached him actually on Cape Cod today on vacation. Mr. Retsinas, thanks for your time.
Retsinas: Nice to be with you.