Treasury Secretary Henry Paulson said today that the Bush administration is working in a number of areas to combat the country’s ongoing mortgage crisis, but added that there is no simple solution to the complex problem.
In remarks prepared for a New York speech scheduled for later today, Paulson said the country is facing a wave of 1.8 million subprime mortgage resets over the next two years, an epidemic which could lead to market failure.
He added that the interest rate freeze plan was devised on these grounds, and would be launched soon.
“By preventing avoidable foreclosures, we will safeguard neighborhoods and communities and fulfill our responsibility of protecting the broader U.S. economy,” Paulson said in excerpts of his speech released by the Treasury.
“However, let me be clear: there is no single or simple solution that will undo the excesses of the last few years,” he cautioned.
He called the housing correction inevitable after a five-year boom led to record sales and price appreciation, and said the housing downturn will last for some time.
“After years of unsustainable price appreciation and lax lending practices, a housing correction is inevitable and necessary,” Paulson said.
“We will likely have further indications of slower growth in the weeks and months ahead,” he warned. “The overhang of unsold houses will contribute to a prolonged adjustment, and poses by far the biggest downside risk.”
Paulson is also expected to warn that there will be no quick announcement of a fiscal stimulus package to solve the current crisis.
“Working through the current situation and getting the policy right is more important than getting the policy announced quickly,” he said.
Paulson also repeated his call for Congress to pass legislation that will allow the FHA and government financiers Fannie Mae and Freddie Mac to purchase more loans.