Treasury Secretary Hank Paulson, a member of the President's Working Group on Financial Markets, came out today with the panel's recommendations on how to avoid another mortgage meltdown/credit crunch. I'm not sure that when you are in the middle of a battle, it is time to deliver the after-action report. Investors might want to pay more attention to the interview President Bush gave Nightly Business Report's Susie Gharib, where he had a chance to rule out a big housing bailout but did not (boldface mine):
GHARIB: But even in addition to all of that, there's still—Americans have a lot of anxiety about the health of the economy. They see that businesses aren't hiring; consumer confidence is way down. Is your administration looking to do more on the economy? Are you working on contingency plans?
BUSH: Well, we're always—first of all, the money hasn't even kicked out yet. I mean, the thing about Washington is that even before the money has hit the streets, which most people think will actually have a beneficial—fairly beneficial effect on growth, in the third quarter in particular, people are now starting to invent other things to do. And my concern is that we pass law and regulation that will make it more difficult for the economy to recover. And so the answer to your question, I'm always open for good ideas, but what I'm not open for is a lot of government intervention into our economy that will be counterproductive in the long run.
GHARIB: I'm glad you brought that up because that is an idea that's floating around about the housing situation. There's a lot of concern that the situation is getting worse and some people think that the federal government should use its resources to directly help struggling homeowners. And is there a way that you would use taxpayer dollars to provide assistance to homeowners as long as they would pay the government back? Or do you rule out using taxpayer money altogether?
BUSH: Well, I haven't seen any—I'm not exactly sure of the plan where the government becomes kind of the lender of last resort. I haven't heard that. I have heard about using taxpayers' monies to buy empty houses, which I think would be a huge mistake. That plan doesn't help homeowners. That plan helps lenders. And we want to help homeowners. And precisely what we're doing is to—we are using taxpayer credit to help people refinance their homes through FHA, as well as Henry Paulson and Alphonso Jackson's plan, bringing people together in the private sector to help renegotiate notes so people can stay in their homes. So our focus has been on helping people renegotiate and stay in their homes. It has not been on using taxpayers' money to help lenders.
GHARIB: So are you saying that you're really not in favor of using taxpayer dollars, even if you heard a really good plan?
BUSH: No, I haven't said that. I just need to hear what the good plan is and without having lasting long-term damage to the economy. I'm not exactly sure what you're referring to, but I do know one plan that's been floated out there was to take $4 or $5 billion and buy empty homes. And I think that would—that doesn't help the problem. That, frankly, makes it harder for the market to adjust and provides relief for those who lent the money in the first place, not those who borrowed.