Foreclosure Plans

According to the National Association of Properties in the United States, the market in Phoenix has declined by 22 percent since the beginning of this year. Neither in San Francisco the situation is much different, with minus 19% in the first half of the year.

The most foreclosures been prescribed in Nevada, Florida and California where a huge number of people lost their homes. That happened because laws are very severe there. In California, for example, the properties are for sale if the owner has not paid the rates for 117 days.

The U.S. Treasury Secretary, Henry Paulson, announced on Wednesday that the government gives up the plan to buy the assets of banks that cannot be sold and he estimated that it would be better that money be invested directly in the capital of these institutions.

We estimate today that the takeover of those assets of banks, is not an efficient use of the funds allocated by the Congress to support the economy, Paulson said at a press conference, AFP informs. Direct acquisition of shares of financial institutions is a much faster and more efficient way to use the new powers to strengthen the financial system, Paulson added.

The U.S. official was for a long time hostile to the idea, before he changed his opinion in mid October, announcing a program through which the state takes direct equity in banks of up to 250 billion dollars.

Now, we do not buy assets lacking of liquidity, related to foreclosures, we will consider the capital needs of non-financial institutions, said Henry Paulson.

Secondly, we will review the strategies designed to support access to consumer credit outside the banking system, Paulson added, mentioning in particular the automobile loan market, the segment of student loans and banking card.

Thirdly, we will continue to seek ways to decrease the risk of execution, said the American official, who reiterated, in fact, the commitment of the authorities to prevent bankruptcies that could represent a risk to the entire financial system.

We lately assist to very strong turbulence on the international markets, in the context in which fears that the U.S. economy will enter foreclosures crisis were emphasized. Currency markets and capital around the world have been affected very strongly in both developed countries, as well as emerging countries. In addition, the central banks were forced to inject massive liquidity in currency markets to stabilize them.

Moreover, the U.S. FED has had even to lower the interest rate of the monetary policy in an attempt to offset the negative effects of the foreclosures crisis on the economy. Central bank actions have been criticized especially bringing the question of moral hazard for a central bank should not try to save the market participants who have engaged in risky activities in order to earn high yields.

In addition, low interest rates in the U.S. in 2000 were the main cause of the real estate “bubble” in the U.S. and lower interest rates could trigger a new “bubble” that could exacerbate the problem.

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