The wave that the federal government has unleashed on borrowers is a “disaster” for consumers, a panel of top economists said Wednesday.
The Federal Reserve and other financial institutions will now need to provide more certainty to borrowers, and help them avoid a repeat of the crisis that led to a government bailout of the mortgage industry in the first place, according to the Federal Reserve’s Council on Economic Advisers.
“The government has not been sufficiently responsive to the challenges of this crisis, and the Federal Open Market Committee is in a unique position to do so,” the economists wrote in a statement.
The Fed’s statement was issued in response to an op-ed by Fed Vice Chair Janet Yellen, in which she called on policymakers to “set a reasonable path for returning home” to the housing market.
The first wave of the government bailout to prop up the mortgage market in the aftermath of the Great Recession was triggered in the spring of 2009, when the Fed issued a $700 billion emergency loan to banks to stabilize the market and stabilize the U.S. economy.
The money was used to prop the housing bubble by buying mortgages from lenders, which were supposed to provide the stability needed to drive up the price of homes.
However, lenders defaulted on their mortgages, and many lenders closed their businesses and turned over more than $500 billion in assets to the government.
The central bank has since increased its rescue operations and has taken on more of the burden of rescuing the economy, but that has not alleviated the financial woes facing millions of Americans who have lost their homes and businesses.
Many of those who have been left behind are being forced to repay their mortgages at a faster pace than their incomes.
The latest bailout program is aimed at helping borrowers pay back their mortgages as quickly as possible.
The federal government will provide $1.6 trillion in loan guarantees to lenders over the next 10 years.
That will pay lenders back for the loans that they are making, which could amount to as much as $7 trillion.
The money will be used to help low-income households repay the loan.
The loan guarantees are the latest sign that the Fed is attempting to boost consumer spending and the economy.
Federal Reserve Chairwoman Janet Yellin has repeatedly said the economy is “strong” and “robust” and the government is in control of its own money supply.
The U.N. estimates that about one-third of the $700 trillion will go to banks, and some analysts have predicted the government will have to spend another $100 billion a month to maintain the current level of spending and borrowing.More: