Market-led Measures Not Enough to Solve Subprime Fallout
Market-based efforts to address the problems associated with the US subprime crisis may not be sufficient, Oxford Analytica says in a new analysis.
Noting that the White House has acknowledged that the government needs to do more, OxAn adds that most market participants deem the administration’s responses to the crisis inadequate. “Recently, some market solutions have emerged that might temporarily ease sub-prime related pressures, but they may not prove satisfactory in the longer term.”
The administration has yet to develop comprehensive policy response to the subprime crisis, especially concerning the inability of market participants to assess their exposure to counterparty and credit risk.
Bush’s preferred market-led solutions may prove to be inadequate, which could provoke Congress to push for more direct government intervention, OxAn concludes.
The report, UNITED STATES: Market-led sub-prime fixes are failing, includes a useful recap and analysis of the various elements of the subprime relief measures, including:
- The M-LEC fund to bail out Structured Investment Vehicles
- Sovereign Wealth Fund investments in financial institutions
- Federal Reserve liquidity measures and regulatory proposals
- The mortgage “workout” policy designed to minimize foreclosures
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January 11th, 2008 at 1:56 pm
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