Bailout May Give Housing Market Some Breathing Room

Los Angeles Times (09/22/08); Hiltzik, Michael A.
The real value of the federal government's $700 billion plan to bail out the banking system may be in buying time for the housing market to recover after months of plunging home values, even though the rescue plan does nothing in itself to shore up the nation's residential property sector. It essentially casts the government in the role of investment bank, buying up debt from troubled financial institutions stuck with securities tied to distressed mortgage loans. However, bringing the money funds under the umbrella of the government could create its own problems if proper regulation is not in place and exercised. Analysts and economists generally agree that a housing rebound is essential to an overall financial recovery, but they also say this cannot be achieved without government assistance to battered banks.