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

Author

Listed:
  • Paul Davidson

    (Visiting Scholar en el Schwartz Center for Economic Policy Analysis. Editor del Journal of Post keynesian Economics)

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.

Suggested Citation

  • Paul Davidson, 2008. "Reviving the home owners' loan corporation to avoid a recession in USA," EKONOMIAZ. Revista vasca de Economía, Gobierno Vasco / Eusko Jaurlaritza / Basque Government, vol. 67(01), pages 372-391.
    • Handle: RePEc:ekz:ekonoz:2008119
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    More about this item

    Keywords

    housing bubble in USA; refinance; subprime mortgages;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation

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