Fed Rate Cut Will Help Economy; Congressional Action Also Needed

December 11, 2007 - The Federal Reserve Board’s decision today to cut short-term interest rates by 25 basis points is an important step to ensure that the economy is not derailed by problems in the subprime mortgage market, and it is now up to Congress to do its part, according to the National Association of Home Builders (NAHB).

“The Federal Reserve’s third rate reduction since September shows that it is determined to cut interest rates as needed in order to keep the economy moving forward, boost consumer confidence and increase liquidity in the credit markets,” said NAHB President Brian Catalde, a home builder from El Segundo, Calif.

In addition, Catalde said that the Fed should be prepared to act again quickly in the event further reductions in interest rates are necessary to stabilize financial markets and reassure investors.

The Fed’s action, along with the plan announced last week by President Bush and Treasury Secretary Henry Paulson to help struggling subprime borrowers, shows that the government realizes the importance of housing to the nation’s economy and the need to get housing back on track, said Catalde.

Catalde also called on the Senate to act promptly on several pieces of legislation that would also help to ease the mortgage credit crunch and increase liquidity in financial markets.

“The Senate should move quickly to approve House-passed initiatives that will modernize FHA, provide tax debt forgiveness when the terms of a mortgage are renegotiated and a portion of the loan is forgiven, strengthen the regulatory oversight of the GSEs and allow Fannie Mae and Freddie Mac to purchase mortgages in high-cost markets,” said Catalde.