Thursday, January 24, 2008

Bush & Co reach deal on Stimulus Plan

The Bush administration and House lawmakers announced agreement on an economic stimulus package that would distribute rebate checks to 117 million families and give businesses incentives to invest in equipment.

``The stimulus package will put money in the hands of hardworking Americans,'' House Speaker Nancy Pelosi said at a press conference with House Republican Leader John Boehner and Treasury Secretary Henry Paulson at the Capitol.

Lawmakers are racing to enact a stimulus measure to try to counter escalating risks of a recession. The Federal Reserve this week made an emergency cut in its benchmark overnight lending rate, lowering it three-quarters of a point to 3.5 percent.

President George W. Bush, in a statement at the White House, said the U.S. economy faces short-term disruptions in the housing market and rising energy prices.

``The country needs this boost to the economy now,'' Bush said. The agreement will result in ``higher consumer spending and increased business investment this year.''

Under the plan, individuals would receive rebates of up to $600 and couples could receive $1,200, plus $300 per child, Paulson said. Rebates would be phased out for individuals earning more than $75,000 and couples earning more than $150,000. Individuals must earn at least $3,000 to get a $300 rebate.

Paulson said the rebate checks may be mailed 60 days after the proposal becomes law, possibly in May.

The accord also seeks to address the growing number of housing foreclosures by including a provision allowing Fannie Mae and Freddie Mac, the largest U.S. mortgage finance companies, to temporarily buy mortgages of as much as $729,750, exceeding a $417,000 federal limit.
Some lawmakers protested that the measure doesn't include more spending. Democrats sought to extend unemployment benefits or provide additional food-stamp aid.

Representative Charles Rangel, a New York Democrat who heads the tax-writing House Ways and Means Committee, said he did ``not understand, and cannot accept'' the dropping of an extension of unemployment benefits from the final stimulus package.

``These are the families we need to protect in times of recession as they struggle to put food on their tables, clothes on their backs and keep a roof over their heads,'' Rangel said in a statement. Rangel added, however, that he wouldn't block the legislation from ``moving forward.''

Business Incentives
Two business incentives were included in the measure. One would allow large businesses to deduct more of the price of new equipment they purchase this year. Small businesses would be allowed to deduct twice the current limit of $112,000 for new equipment purchases.
Senate Democratic leaders, while praising the House agreement today, said the measure will be amended in that chamber.

Senate Republican Leader Mitch McConnell called for quick action.

``We can all agree that we must act soon if we want to provide timely relief to American families and job creators, and boost our fundamentally strong economy,'' he said in a prepared statement.

Fixed-rate mortgages at lowest in almost four years

The 30-year fixed-rate mortgage averaged 5.48% for the week ending Jan. 24, down from 5.69% last week, according to Freddie Mac's weekly survey. The mortgage averaged 6.25% a year ago; the 30-year hasn't been lower since the week ending March 25, 2004, when it averaged 5.40%.

The 15-year fixed-rate mortgage fell to an average 4.95% this week, compared with 5.21% last week. The mortgage averaged 5.98% a year ago; it hasn't been lower since the week ending April 1, 2004, when it averaged 4.84%.

Five-year Treasury-indexed hybrid adjustable-rate mortgages averaged 5.13% this week, down from last week's 5.40% average. The ARM averaged 6.00% a year ago; it hasn't been lower since June 30, 2005, when it averaged 5.06%.

And 1-year Treasury-indexed ARMs averaged 4.99% this week, down from last week's 5.26%. The ARM averaged 5.49% a year ago; it hasn't been lower since Oct. 27, 2005, when it averaged 4.91%.

To obtain the rates, the 30- and 15-year fixed-rate mortgages, as well as the 5-year ARM required payment of an average 0.4 point, while the 1-year ARM required payment of an average 0.6 point. A point is 1% of the mortgage amount, charged as prepaid interest.

The Freddie Mac survey covers conforming loans, mortgages smaller than the $417,000 limit. A separate survey released by showed that the 30-year fixed-rate jumbo loan, for mortgages above that limit, averaged 6.85% this week, down from 6.98% last week.

"Economic news released last week confirmed the weak condition of the housing market. Housing starts fell further in December to 1.006 million units, the slowest pace since May 1991," said Frank Nothaft, Freddie Mac chief economist, in a news release.

"For the year as a whole, housing starts dropped nearly 25%, from 2006's level. This was the largest annual decline since 1980. New permits issued also fell to the lowest level since March 1993."