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Will These Plans Work?

Posted October 12, 2009 by Matthew Denton

New economic relief programs wait for approval.

There are new economic relief programs waiting for approval in Washington. These are the Treasury Department’s $2.5 billion dollar-for-dollar matching for investors who would purchase banks’ toxic assets, and the state program assistance on first-time, low- and moderate-income buyer support.

These plans have been laid out for months already.  But, after the TARP, the government is taking extra caution when it comes to delivering an economic incentives.  There are some hurdles for these two plans..

First, it would take a lot of motivation for private firms to prop up the market though toxic asset purchasing.  Though there are investors who specialize in toxic assets (and earn much when the market favors them eventually), it’ll be quite a feat if they can turn even 80 percent of participating firms to profit.

Second, the latter plan of assisting 100,000 borrowers annually trough tax-exempt bond sales is undoubtedly getting delayed.  When they’re targeting low- and moderate-income buyers, they’re facing the same risk that brought us to the property slump.  It’s either these buyers refuse to take a loan or they end up in default.

Finally, state initiatives for housing recovery won’t be their top priority this year.  Just how many governors have announced that they’re taking state budget cuts from infrastructure to education?  Definitely, buyer programs would be affected too.

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