U.S. Financial Crisis Goes Global. What Can Be Done? Keep People in Their Homes

I'm no economist, but I can read. The front page of my morning paper has huge, screaming headlines about global stocks sinking, the Dow closing below the 10,000 level for the first time in four years, Germany drafting a plan to shield its banking sector and no planned raises for local teachers because of a now-expected budget shortball, among others. The front page looks downright apocalyptic.

Most of this news seems far away -- it's on Wall Street, in Berlin, in Tokyo. But it's not. It's affecting those teachers in Maryland. It's affecting the presidential race in states like Michicgan (U.S. Sen. john McCain pulled his campaign out last week) and Ohio, where a new poll shows folks' economic anxiety on the rise along with the poll numbers of U.S. Sen. Barack Obama.  

What can we do?

For the last several weeks, NDN has argued that Congress and the President must make a serious effort to slow down the continuing deterioration of the housing market that ultimately has driven the problems in financial institutions. The bottom line? Keep people in their homes. 

So long as housing values continue to fall and foreclosures continue to climb, housing-based securities and derivatives will continue to default, further weakening financial institutions and the businesses and households that depend on them for credit.

In an insightful new Associated Press report (well worth reading) on just what caused the financial collapse, whom it's affecting and what might be done to fix it, AP's Tom Raum talked to NDN Globalization Initiative Chair Dr. Robert Shapiro:

Rob Shapiro, who was an economic adviser to President Clinton, said the crisis in Europe will turn out to be at least as severe as it is in the United States. "Between Europe and the United States, we'll take everybody else with us. And this is reflected in the markets," he said.

Shapiro, who heads the global initiative program at NDN, a Washington think tank, said one step that might help restore confidence would be for the government to set up a program to make direct loans to people facing foreclosures. Another might be for the government to turn all the problem mortgages held by Fannie Mae and Freddie Mac into 30-year fixed rate ones.

As Jake pointed out last night, the presidential campaigns are engaged in plenty of political maneuvering on the eve of the candidates' second debate, but Obama made clear in a speech yesterday in North Carolina that he knows very well the importance of addressing the ongoing mortgage crisis.

So again, NDN urges Congress and the President to take steps to stablilize the deteriorating housing market. Only then will we be able to address the economic struggles of everyday people here at home and turmoil in the markets abroad.