WASHINGTON, DC - The Obama administration this week will announce a "good, solid" plan with the goal of stemming mortgage foreclosures and putting a floor under falling real estate prices, a senior White House aide said on Sunday.
Speaking on "Fox News Sunday," senior adviser David Axelrod said the plan that President Barack Obama plans to announce on Wednesday will aim to stem foreclosures, provide immediate help to homeowners who are "right on the edge" of foreclosure, and ultimately help in "raising home values that have been plummeting."
Mr. Obama plans to unveil his housing plan during a visit to Phoenix. As part of his swing through western states, he is set to stop in Denver Tuesday, when he will sign the $787 billion economic-stimulus plan just passed by Congress.
Mr. Axelrod provided few details of the housing plan, but said a government investment of $50 billion to $100 billion to fund foreclosure prevention "is obviously a necessary part." He promised that the plan would contain "a lot of aspects."
In a later appearance on NBC-TV's "Meet the Press," he cited a letter Mr. Obama recently read from an Arizona homeowner as an illustration of the problem. "He showed me a letter the other day that was just heart wrenching from a woman in Arizona whose husband lost his job," Mr. Axelrod said. "He now has a job that's one-third the pay and they're really struggling to make their payments and meet their responsibilities. And she was emblematic of people all over this country."
One likely element of the plan would reduce Americans' payments on troubled mortgages, people familiar with the discussions said late last week, possibly through a cut in the interest rate, the costs of which would be shared by the government and mortgage servicers. Government officials would make the reduction available to people who are at risk of defaulting. A loan-modification program at government-backed Fannie Mae and Freddie Mac currently calls for holding monthly housing-related payments to 38% of pretax income. The new formula is likely to be as low as about 31%, according to some people.
In addition, the administration is expected to endorse a plan to allow judges to modify mortgages during bankruptcy proceedings in some circumstances, a move long opposed by the mortgage industry. And it could push measures that would remove some contractual obstacles that hinder mortgage servicers from modifying troubled loans. Pending any announcement, the country's three largest mortgage lenders are putting a temporary halt on foreclosures.
In his Sunday TV appearances, Mr. Axelrod reiterated the Obama administration's commitment to keeping the U.S. auto industry alive, but underscored that all parties involved in negotiations over restructuring need to be open to making concessions. General Motors Corp. and Chrysler LLC must submit their plans for returning to financial viability on Tuesday, as a condition for having received federal loans.
The companies also are seeking more money to help them get through the current recession. However, GM and the United Auto Workers union have not made much progress so far in their negotiations to reduce the auto makers' labor-related costs.
Mr. Axelrod suggested that investors in the auto makers should also make concessions. "We need a thriving auto industry in this country," he said on Fox, citing the "millions" of jobs that depend on the sector. "We have a vested interest." But he added that "everyone is going to have to continue to work toward a solution. … There is going to have to be a restructuring."
Mr. Axelrod celebrated the stimulus bill's passage, saying it reflected the president's goals and his initial $775 billion target. But he also sought to lower expectations that the stimulus bill would have a big impact immediately, repeating the administration's message that the economy "is likely to get worse before it gets better."
On "Meet the Press," he held out hope that the just-passed legislation ultimately could prevent the unemployment rate from reaching 10%, as some economists expect. "The trajectory is horrible," he said. "This should help put the brakes on that and slow it down."
Mr. Axelrod also defended the administration's plans for shoring up the financial system. Treasury Secretary Timothy Geithner last week unveiled the plan, which provides a fresh round of capital injections for banks, more Federal Reserve lending and the establishment of a public-private venture that would buy troubled assets from banks. But critics and the markets were disappointed in its lack of detail. Mr. Axelrod said Mr. Geithner will be developing specific tactics to implement the plan "in the coming weeks."
"We're going to get this right," Mr. Axelrod said. "We can't gauge our success on one day of fluctuations in the stock market."
In response to a question about a possible government takeover of major U.S. banks, he didn't rule out deeper government intervention. "We will do what we need to do, but our long-term goal is to have a strong private sector banking and financial system," he said on Meet the Press.
On ABC's This Week, Sen. Lindsey Graham (R., S.C.) suggested that nationalization isn't out of the question.
"I think if you put most of our major banks under a stress test" as the administration plans, "they're going to fail," he said. "I would not take off the idea of nationalizing the banks."
But Sen. Charles Schumer (D., N.Y.) said government takeover is not a good idea. "I would not be for nationalizing," he said. "I think government's not good at making these decisions as to who gets loans and how this happens."
As part of the economic-stimulus plan, Congress inserted sharp limits on compensation for executives whose firms receive government bailout funds. Mr. Axelrod said the administration would revisit those limits; other officials have said the administration wants to make the limits less onerous so that banks could retain talented executives.
Mr. Axelrod suggested that the president would soon sign an executive order lifting the ban on federal funding for embryonic stem cell research, which had been imposed by former President George W. Bush.
Source: WSJ.com