Foreclosure High; TARP to be Extended Till October

Author: Adam Smith

Author: Adam Smith

The US economy is far from the recovery stage. There are still adverse currents on the recovery path. The primary reason is foreclosure. The government must be able to respond strongly to the crises. It must be able to wind up the emergency programs. This was revealed by Treasury Secretary Timothy Geithner.

Geithner said that the real estate market is yet to recover. The Troubled Asset Relief Program (TARP) prevented complete meltdown. However, Geithner believes that the economy is far from the recovery stage. It may take a while for the economy to bounce back on the growth track. There are still a few stumbling blocks in the path of recovery. These are the high rate of unemployment and foreclosure rate. Foreclosures are still very high in many states. The worst hit regions are Nevada, California and Arizona where many people have negative equity on their homes. That means they owe more on their houses than they are worth. Besides foreclosures, there is credit crunch in the market. Lenders are very hesitant to lend to people. The damaged securitization market is another stumbling block to recovery.

The bail-out program has been extended for a year till October 3, 2010. However, the program will be phased out soon after that. He defended the extension of the bailout program by saying that such policies that help to contain crises must be continued for a while. Then only it would have significant impact.

In 2009, Congress approved a US$700-billion program to help buy toxic assets from banks. The funds thereby created were injected into sick banks as capital. Now the biggies in the financial market are keen on exiting TARP. They wish to repay their money so that they are free from all restrictions. The Bank of America Corp had sent Treasury US$45-billion cheque. Citigroup, too, is also negotiating with Treasury for payment. It is worth mentioning that Citigroup received US$45-billion in 2009. Geithner observes that banks are returning TARP money faster than expected. That will generate substantial income from the sale of warrants. TARP would be extended to help the government cope with the crisis. Experts are of the opinion that unless the employment scenario improves, the economy will not recover. Initially, it was the subprime loans that caused the crash in the real estate market. Now, it is unemployment. As people lose jobs even those who had always been regular in mortgage payment faltered, triggering off foreclosures. Original: Foreclosure High - TARP to be Extended Till OctoberAbout the Author:

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