No Easy Solutions Seen For Financial Crisis
CRISIS
Union Leader
Matt Negrin
Boston University Washington News Service
20 March 2008
WASHINGTON — Brought on by a shaky housing market and subprime mortgages, the financial crisis — which may force thousands of New Hampshire residents from their homes over the next year — has no easy solution, economists and politicians concede.
Rep. Paul Hodes, D-N.H., and Sen. John Sununu, R-N.H., in an effort to spread information about mortgages and regulations, have held separate meetings in the state that have attracted handfuls of homeowners worried about the spiking number of foreclosures.
In Washington, meanwhile, Congress has passed a bill designed to boost the economy by giving families quick cash this spring.
“It is a one-time shot in the arm for the economy,” said Hodes, who sits on the Financial Services Committee. “That’s the design of an economic stimulus package.”
But more needs to be done, Hodes said, such as passing another stimulus bill that would give aid to state governments experiencing “tremendous contractions” in revenue and increasing costs for state-run programs like Medicaid. Extending insurance for the jobless also would inject money into the economy quickly, he said.
Sununu, who said the country is in a recession, is calling for Congress to pass bills that would let the Federal Housing Administration extend programs to eligible homeowners and help consumers refinance their credit. Tax credits for families who purchase troubled homes would help move the market as well, he said.
“In an economic slowdown, the worst thing we can do is raise taxes,” said Sununu, the newest member of the Finance Committee.
It is difficult to predict an end to what many economists are calling a recession, though some estimate the crisis could continue for 12 to 18 months.
“History says we’ll come out of this,” said Ross Gittell, a University of New Hampshire professor who analyzes 10-year projections of economic development in the state and New England. “Not to say people won’t suffer, but it’s not the end of the economy.”
“Everybody is going to be affected by what seems to be a recession in the U.S. economy, the slowdown,” Gittell said. “Retail sales, and consumer spending, that’s affecting employment in the job market, and people’s economic prospects.”
The economic downturn began when the housing market was strong and consumers took on improperly regulated loans created to expand buying, Gittell said. The assumption was that housing prices would go up forever, especially in the last few years of the strong market, he said.
Now lawmakers in Washington are trying to ease the burden on families hurt by subprime mortgages by passing legislation designed to boost the economy. “Policy can help alleviate suffering and pain and help certain segments,” Gittell said.
Although New Hampshire families may fare better than those in other parts of the country because of the state’s “frugal approach” to spending, Hodes said, the middle class took a hit when wages remained stagnant and housing prices began to drop.
“What we’re experiencing in some ways is what you’d call a perfect storm,” he said, adding that about 4,300 homes in the Granite State will be foreclosed by the end of 2009.
Congress’s role in solving the credit crisis, however, is debatable. The House and Senate can pass bills to force federal agencies — like the Securities and Exchange Commission — to change mortgage and finance policies. but the legislation could have unintended consequences, Hodes said.
“Legislation is the tool of last resort in some ways,” he said, though he said the regulatory roles may have to be defined for the SEC and the Treasury Department.
Congress should, however, deal with parts of the problem, like giving better health insurance prices to small businesses and confronting the housing crisis, Sununu said. “They’re all different situations we face, and we can find different solutions in each of these areas,” he said.
To stimulate the economy, lawmakers should address the “roots” of the problem, like helping families facing foreclosure and creating jobs by “investing in tax and regulatory relief efforts,” said Sen. Judd Gregg, R-N.H., in a statement.
New Hampshire’s other Democratic House member, Carol Shea-Porter, was on a trip to Iraq and did not respond by press time.
####
