President of C.A.R. comments on financial markets

Sept. 19, 2008

Dear C.A.R. Member:

What a week this has been for the financial markets! I’ve been following the tumultuous events on Wall Street, the 24/7 news cycle, and the actions of our Congress and the federal government. No doubt you have as well.

As you know, in recent weeks Fannie Mae and Freddie Mac were placed into conservatorship, the federal government bailed out AIG, Bank of America purchased Merrill Lynch, and Lehman Brothers filed for bankruptcy. Late this week, the credit market appeared to be on the verge of collapsing.

Like most Americans, I’m concerned about both the near-term and long-term health of our financial system and its impact on the housing market, and I’m sorting though an over-abundance of news and information trying to make sense of it all.

Although it is premature at this point in time to address specifics in an evolving plan, C.A.R. strongly supports the intent of Congress and the federal government to calm the financial markets, address liquidity issues and to begin laying the foundation of a new mortgage finance system.

To that end, I want to assure you that your state Association is closely monitoring the events in our nation’s capital. C.A.R. is taking appropriate steps to ensure that the needs of California are addressed, and to emphasize that housing is a central part of the equation in the federal government’s efforts moving forward. We’re actively engaged in ongoing dialogue with our congressional representatives and other key leaders in Washington.

To recap what’s happened -- so far -- this week:

U.S. Dept. of the Treasury Secretary Paulson today announced that Congress and the administration intend to take poorly performing assets, primarily mortgage-backed securities, off the books of financial institutions. These assets have been a prime impediment to the ability of financial institutions to lend money.

The government also prohibited the short sale of nearly 800 financial institutions for 10 days, and may extend this prohibition to 30 days.

The U.S. Dept. of the Treasury also plans to increase the amount of mortgage-backed securities bought from government sponsored enterprises (GSEs) Fannie Mae and Freddie Mac, in an effort to increase the GSEs’ role in the housing market.

The Federal Reserve and other major financial institutions worldwide also made hundreds of billions of dollars in loans available to commercial banks in an effort to improve liquidity.

Our expectation is that Congress and the administration will work together to craft legislation as early as next week addressing these critical issues. We expect to have a good sense of what the legislation will contain by this weekend, prior to financial markets opening Monday morning.

As events continue to unfold, look to C.A.R. as your one-stop source for news and information on these critical issues. Beginning Monday, you’ll receive “Market Matters Daily Briefing,” a daily e-mail that will aggressively monitor the situation and keep you informed as events play out. Your regularly scheduled “Market Matters” e-mail on Thursdays will include tools and information to help you explain and communicate to your clients. You also can check www.car.org for recent headlines and video clips, and Wednesday’s “C.A.R. Newsline” e-mail for additional information pertinent to the ongoing story. Stay tuned for more.

Sincerely,

William E. Brown
2008 President
CALIFORNIA ASSOCIATION OF REALTORS®