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Paulson Hard at Work on the New Subprime

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Hank Paulson lamented the disappearance of the subprime markets in a speech today as he discussed the housing market and its continuing headwinds. His talk covered predictions of further trouble, including the warning of a possible 2.5 million foreclosures this year, and discussed the Treasury's ongoing efforts to encourage workouts in lieu
of foreclosures that could be reasonably avoided. Paulson also repeated his position that "untenable" mortgages shouldn't receive a bailout from Washington.
The interesting part was his plea that the US "not lose the benefits of the subprime market as we eliminate its flaws." Paulson said that his boys were working on the possibility of covered bonds playing a major part in the mortgage market as a means to increase the availability of mortgage financing. The loss of financing for subprime mortgages has made the correction "more challenging."
Hank might say that it makes this particular headwind fiercer for the economy; since we prefer swimming metaphors to sailing ones we would use "treading water." "Caught in the undertow" and "flailingly struggle to overcome the current" also come to mind.
Paulson: Home Foreclosures Will Remain High [CNBC]
Paulson Touts Covered Bonds As Way to Boost Homebuying [Wall Street Journal]

--Senior headwind correspondent Andrew.

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