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If it doesn't have to be something else -- that that our president talked about was that was the US recovery not -- editing isn't.
At this -- I don't see a double dip recession in the US economy but Whitman talking about.
For weeks now here Fox Business a possible double dip in the housing market in fact folks I think -- -- last week a lot of economic problems.
Here in this country a lot of it has to do with the housing -- and then the bus.
We're finding out folks today -- -- -- the Wall Street Journal by the way that almost 40% of homeowners.
Who borrowed for second mortgages are now underwater they owe more than their homes are worth this could be the disaster that we're not talking about yet -- -- and -- an economic president chief economist.
Is with me and core logic came out of the port and the -- journal was all over the story this morning Sam but were you surprised.
By the fact that only 40%.
Of homeowners that took down those second mortgages were now under water.
No I don't think it's surprise at all I think that.
People who took out second mortgages were -- inevitably seeking to layer on additional leverage on top of their primary mortgages.
We have a market -- between 20022003.
And we're really up to the point where housing turned negative and began to exert significant drag on the economy.
Where lenders were more than amenable two extending credit in a way that -- supposed that we knew we couldn't really experience any decline in the value homes.
-- -- that's what's happened home values -- fallen.
And so we find at a very large share people who took out -- second mortgages and very often not for reinvestment into their homes but two make investments or.
Two energy consumption in other areas -- on holidays.
You know by buying televisions -- paying tuition.
Come any of those things.
We have a we have a policy regime we have to understand it also encourages -- -- -- home equity lines of credit.
A given day deductibility of the mortgage interest given the lower cost of credit through home equity lines as compared to credit cards people really encouraged for very long period to do that.
-- points -- six trillion -- between a four to six people took got to Korea next -- Ten dollars.
An economically and that but this is why this is why Europe matters look.
That of the EU the US economy the economy the global economy for ten years twenty years thirty years was driven by American consumers.
We were borrowing against our houses spending like mad.
Powering the whole economy.
That is over that's what these numbers tell you.
You knock you can't count on the American consumers to pull us out of this slump.
The growth has to come from somewhere else we need the rest of the world -- that it for a good for the next stage of growth.
We're gonna have to rely on the rest of the world not vice Versa.
That's why Europe matters again.
Asia and -- figure mattered we got Asia what -- grown at 45 times the rate of Europe.
And and I think also that sophisticated financial institutions that went to a near death experience.
Ought to be better -- in better shape to adjust to any shot becomes nothing has to be a does that.
Fingerprint have something interesting in Atlantic that's a sand because it seems to -- is the issue of credit and credit is not available if you got a home that's underwater now.
Forget trying to refinance that's going to be next to impossible.
And forget trying to deal with the bills that you may have that you because you bought that boat with the with the second line of credit that you can't pay the payments on -- right.
Consumers are constraint were beginning to see some signs that -- -- seizing but only for the share of the population that is it you know gainfully and securely employed.
I think the real key to this whether we're talking about.
Helping people to get out of homes where they can't make the payments every month or talking about a lot of people to access credit again to drive consumption not to worry about cholesterol is a big piece about the speed however because we don't want to give credit to people whose houses are underwater and who don't have jobs and -- got -- got into this -- there -- absolutely we need to -- we need to -- demand that is -- driven not -- public policy intervention but -- growth in the number of calls for people come back into the market -- Here now that I have a secure stream of income I could potentially think about becoming a homeowner.
Not ultimately is -- will drive demand for housing not not short term interventions designed to accelerate deductions or anything else -- and support prices.
I don't wanna get judgmental here but the very fact that anyone takes out a second mortgage on -- home yelling -- play the game of monopoly.
We -- our mortgage and property and take -- second -- to the clear sign of trouble.
Shouldn't we know from the very fact that you take a second mortgage and all that it might be that you're more likely to possibly -- someone who has only one mortgage on his home.
Absolutely we know that there's a strong what economists would -- -- -- selection bias.
-- the person who is going to go and take a second mortgages very often.
Riskier bet for the bank during the period from the early two thousands right up until the point where housing prices start to decline.
-- -- bank risk models were really playing down those risks and their credit was extended in spite of the fact that exactly what you point out is correct.
Well -- -- come down to jobs element the end of the day and that's and in that I think via the man we just saw on television the president's gonna have to address sooner rather than later Santana thank you very much.
Thank you for standing by by the way as we listen to that news conference from President Obama.
And German chancellor on the --
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