Roubini: More Than $1 Trillion Needed to Solve Housing Crisis (mortgages, prices, vents)

[baystater]

Roubini More Than 1 Trillion Needed to Solve Housing Crisis: Tech Ticker, Yahoo! Finance

But $25 billion -- or even the GAO's worst-case $100 billion estimate -- pales in comparison to the cost of doing nothing, says Nouriel Roubini, NYU professor and chairman of RGE Monitor.

"We have to find a solution where government intervention prevents a disorderly outcome" in the housing market that leads to a "systemic banking crisis," Roubini says.

Roubini's main concern stems from a view that the "housing recession is not bottoming by any standards," in contrast to hopeful comments from Paulson on Fox News and Barron's last weekend.

The economist believes U.S. home prices will ultimately fall 30% from their peak -- vs. 18% to date according to the S&P Case-Shiller Index -- "before bottoming out some point in 2010."

In the interim, the negative wealth effect of declining home values and increase in "underwater" mortgages will lead to more Americans walking away from their homes. Such "jingle mail" threatens to ultimately cost $1 trillion in credit losses, wiping out 75% of the capital of U.S. financial institutions, Roubini warns.

It is that "disorderly" outcome Roubini says the government cannot afford to let happen. With "the charade" that Fannie and Freddie weren't already government agencies over, he believes a nationalization of the 50% of mortgages not owned or guaranteed by Fannie and Freddie will be necessary, and the Frank-Dodd Bill is a small step down that road.

From Roubini's view, nationalizing housing avoids the government having to nationalization the entire banking system, making it the lesser of two evils

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[DMenscha]

1 Trillion. That's what? Like another year in Iraq?

[chuck22b]

Originally Posted by DMenscha

1 Trillion. That's what? Like another year in Iraq?

Nice one...1 trillion is the worse case scenario (ie, nothing done)... I think it might be 10 years :P according to:


http://zfacts.com/p/447.html

But of course that is only the amount budgeted, the actual cost estimates vary... not to mention the 4,000+ lives lost which are priceless . The 25 billion cost estimate for the bail out would be chump change comparatively.... just a few less missiles here and there :P


-chuck22b