With the strong backing of the nation’s home builders, the U.S. House of Representatives on Oct. 3 by a vote of 263 to 171 approved an economic rescue plan aimed at stabilizing and restoring confidence in worldwide financial and credit markets.
Out of concern that turmoil in the financial markets was severely curtailing the flow of credit for housing and other business sectors and that the global economy was teetering on the brink of catastrophe, the leadership of the National Association of Home Builders on Sept. 24 called on Congress to pass the Emergency Economic Stabilization Act of 2008 “as soon as possible.”
In conjunction with the call to action, which was unanimously adopted at a special session during NAHB’s fall board of directors meeting in San Diego, all 235,000 members of the association were urged to immediately contact their congressional delegations and ask them to pass the plan without delay. The board formally voted in support of the legislative effort at its official meeting on Sept. 26.
Last week’s House action came two days after the Senate approved the measure by a margin of 74 to 25. The bill was then quickly signed into law by President Bush.
“This legislation was absolutely essential to prevent a collapse in our financial system that would have inflicted devastating damage to our nation’s economy,” said NAHB Chairman Sandy Dunn. “Hopefully, this will set the stage for rebuilding confidence, restoring the availability of credit for businesses and consumers, and reversing the downward spiral in home prices and rising foreclosures that are root causes of today’s financial turmoil,” she said.
“We will continue to work with lawmakers on both sides of the aisle to take whatever other steps are necessary to put housing and the economy back on track,” Dunn added.
The legislation will allow the U.S. Treasury to purchase troubled mortgage assets that have been weighing heavily on the balance sheets of financial institutions, a process that will help recapitalize them and restore the flow of credit. The Treasury will hold those assets until conditions improve and then resell them.
The bill also contains other NAHB priorities, including a one-year “patch” of the Alternative Minimum Tax and extension of several business tax breaks, including the 45L credit for new, energy-efficient homes that is due to expire at year-end. (For a related story in this issue of NBN, click here.)
The measure also contains a provision to temporarily increase federal deposit insurance on bank and credit union accounts to $250,000, up from $100,000.
NAHB Chief Economist David Seiders told the board that there is more than a 50% chance that the economy will lapse into a recession.
Seiders predicted that the long decline in new home sales is in the process of reaching a bottom that will be followed by growth in 2009 that should put new residential construction on a slow, upward path.
The ultimate objective now, he said, is to stabilize home prices and the foreclosure rate. “There is a lot to be fixed here,” he said, “but it is not a doomsday scenario.”
Seiders noted that with Fannie Mae and Freddie Mac now recognized as being fully backed by the U.S. government and the FHA market growing rapidly there are “large, strong, reliable sources of home mortgage credit” available to help restore the housing market, and regulators will hopefully roll back some of the mortgage underwriting standards that have cut off many prospective home buyers from the credit they need.
“Once we turn the corner” on the housing downturn, he said, “the longer-term outlook is terrific.”
Also on hand to provide some words of encouragement to the NAHB board was Irish ambassador John Burton, Ireland’s former prime minister and the current head of the European Union delegation to the U.S.
“Credit is about belief, and what the U.S. needs is an injection of confidence,” Burton said. He predicted that the U.S. will experience “a certain amount of pain or deferred pleasure” to solve its current financial problems.
In its drive to publicize its position on the economic rescue plan and the urgent need for congressional action, NAHB was widely represented in the news media.
In the first two days following the endorsement of the call to action in San Diego, NAHB Executive Vice President and CEO Jerry Howard was interviewed by Reuters, Bloomberg, The Wall Street Journal, CNN Money and Finance & Commerce Magazine.
In addition, NAHB arranged for ABC Nightly News to interview a builder member in Kansas City to discuss his local housing market as well as the need for Congress to enact the rescue plan.
In the days approaching the decisive House vote, NAHB, along with the U.S. Chamber of Commerce, the National Association of Realtors, the National Federation of Independent Business and other business groups ran a full-page ad in the Oct. 1 issue of The Washington Post encouraging citizens to call their lawmakers and ask them to pass the rescue plan. The same ad ran in the Oct. 2 editions of USA Today, The Wall Street Journal, The New York Times, the Los Angeles Times, the Chicago Tribune, the Orlando Sentinel, Roll Call, Politico and The Hill.
As leaders in Washington continued to deliberate over the bill, NAHB members e-mailed and phoned their congressional delegations at www.capitolconnect.com/builderlink and the NAHB toll-free legislative hotline, respectively, citing the need for the rescue plan and urging Congress to “act this week to bring stability to the financial markets.”
For more information on the legislation, e-mail Greg Brown at NAHB, or call him at 800/368-5242 x8421.