How does this plan relate to the recently approved Emergency Economic Stabilization Act of 2008?
This plan is especially helpful in combination with the Stabilization Act. Shoring-up house prices increases the value of the securities that the Government would buy, thereby minimizing the net cost to taxpayers if the plan were to be implemented. In addition, this plan can be started right away through the government’s conservatorship in Fannie Mae and Freddie Mac and its control of the Federal Housing Authority, providing an immediate stimulus to the economy and to the bulk of homeowners. By moving an appreciable amount of mortgages off bank balance sheets to the government’s balance sheet, this plan helps recapitalize the banking industry.
