LAS VEGAS - Many in the credit union community are expressing general support for a government bailout of the troubled mortgage market, but are also expressing reservations over the vagueness of the proposed $700-billion rescue plan.
During WesCorp's Economic Forum here, for instance, Matthew Jozoff, head of mortgage research for JP Morgan, asked an audience during his session to raise their hands if they agreed the bailout was necessary. After most of the room affirmed, Jozoff said he agreed with the majority.
"This is a tumultuous time right now," Jozoff said. "It is difficult to put ideas on paper because the market keeps changing. But the No. 1 rule is: don't underestimate the willingness of the government to solve this crisis."
According to Jozoff, a government purchase of agency mortgage backed securities will be "huge" for the market, but by no means will the plan-if it is approved by a skeptical Congress-resolve all problems. He said the main goal is to reduce mortgage rates. If rates do decline, he noted, Treasury will need to buy fewer mortgage-backed securities as the market will be doing its work for it.
The WesCorp meeting occurred at the same time hearings were taking place on Capitol Hill and Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke were being pressed for details on the plan. Scott Carnahan, consultant for McLean, Va.-based RiskSpan, voiced the opinions of many conference goers when he said, "It's a great idea, but the devil is in the details."
"Other than Fannie, Freddie and Ginnie, the government should not decide what price to pay for securities," Carnahan asserted. "Any trading operation that is started from scratch has a learning curve, so hopefully Congress will hire someone with knowledge and experience. If Congress puts too many limitations on the plan, it won't work."
Joe Sturtevant, founder of RiskSpan, labeled the proposed intervention a "needed" idea, but added, "I'm dying to find out all the details."
"In general, it is a necessary evil to restore confidence," offered Sturtevant. "The government coming in hopefully will put confidence back in the system, which is crucial."
Ariel Chun, CEO of University of Hawaii FCU in Honolulu, said her first impression is she will support the plan. "We need to be there as credit unions, because we don't want credit unions not to be considered part of financial institutions in this country," she said. "We've worked so hard to get credit unions thought of when people talk about banking. We need to be heard and we need to be visible."
Because the financial system crisis is so large, Congress "has to do something" Chun opined. However, she opposes golden parachutes for those individuals who created the mess.
"It affects the whole country, and we know what will happen if we don't do something. Some greedy people put us into this situation, and I don't want to see the taxpayers bailing them out."(c) 2008 The Credit Union Journal and SourceMedia, Inc. All Rights Reserved.http://www.cujournal.com/ http://www.sourcemedia.com/
