Friday, March 07, 2008

Larry Summers: $400 Billion in Losses is "Substantially Optimistic"

by Bill McBride on 3/07/2008 03:55:00 PM

Former Treasury Secretary Lawrence Summers spoke at the Stanford Institute for Economic Policy Research today. Here are a few excerpts from the WSJ: Summers Says Stresses Require More Action

Mr. Summers ... said federal housing and mortgage policy is "behind the curve." He said the focus on adjustable rate mortgages which are resetting is misplaced; lower interest rates ameliorate that. He estimated 30% of homes with mortgages -- about 15 million in all -- are likely to be worth less than their mortgages. He argued foreclosures are enormously costly and destroy value and thus should be prevented as much as possible.

He also said estimates that the housing and mortgage bust will reach $400 billion are likely to be "substantially optimistic".
I'll post a video when it is available.