Finance chiefs back government stimulus programs

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July 21, 2013 by apicomely

Further Progress on Housing Finance

“The debate between growth and austerity seems to have come to an end,” the official said. The benefits of U.S. pro-growth fiscal policies tapered only after the automatic cuts known as sequestration kicked in earlier this year. The efforts of the G-20 to coordinate economic policy are intended to help the world recover from the recession that began in 2007.

The proposal for a fully private system contrasts with the bipartisan legislation introduced a few weeks ago by Senators Bob Corker, Republican of Tennessee, and Mark Warner, Democrat of Virginia, in which a government guarantee would kick in on covered mortgage-backed securities after private investors have first taken losses equal to 10 percent of the value of mortgages receiving the guarantee. The Corker-Warner approach involves charging insurance premiums for the government guarantee, so the interest rate difference between the two systems ultimately depends on the insurance pricing. In general, though, a fully private system would be expected to involve greater changes in interest rates and the availability of mortgages with long-term fixed interest rates. Note that the Corker-Warner proposals 10 percent first-loss private capital is much closer to the House bill than it would seem just from comparing the required private capital shares of zero (the situation now) to 10 percent (Corker-Warner) and 100 percent (Hensarling).

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