It doesn’t sound pretty.
Have no doubt, Phase II is coming. At best, it will require hundreds of billions of dollars more, at worst more than a trillion, to deal with more bad loans and toxic assets weakening the economy — problems that Phase I can’t fully absorb. Because unemployment is still rising — ensuring that the initial spate of mortgage defaults, which came from loans to people who could never repay, will be followed by another spate of defaults from those who could repay but now can’t because the deteriorating economy has stripped them of their jobs, their businesses or their credit lines.
But there is reason to hope – that’s what we do these days, right?
The success of the president’s approach, added Hormats, will depend on everything, indeed, working together — “that the fiscal stimulus will improve the housing markets by creating more employment and growth, the improvement in housing will take pressure off banks, and less pressure on the banks will improve the availability of credit that will help housing and business job creation.”