Reviving the home owners' loan corporation to avoid a recession in USA

Paul Davidson

EKONOMIAZ. Revista vasca de Economía, 2008, vol. 67, issue 01, 372-391

Abstract: The original subprime mess has ultimately resulted in an insolvency problem for millions of U.S. households. The government’s fiscal “stimulus” plan does not directly address this insolvency problem. The Federal Reserve pumping in more liquidity will not end the housing insolvency problem. Instead, I suggest a tried and true comprehensive program to create a major federal facility to refinance mortgages at low rates and extended maturities, and to finance new investment in private sector housing. The goal of this new lending facility will be to: 1) end the insolvency housing problem; 2) avoid a serious recession, and prevent similar financial bubbles due to securitization of loan-backed financial assets from developing in the future.

Keywords: housing bubble in USA; refinance; subprime mortgages (search for similar items in EconPapers)
JEL-codes: G14 G21 G33 (search for similar items in EconPapers)
Date: 2008
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