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Dispute over Corona aid: US Federal Reserve warns of real estate crisis

2020-09-24T18:08:54.499Z

Republicans and Democrats are not making any headway in the dispute over new corona aid. Without an agreement, however, there could soon be massive evictions, warns the US central bank - as at the beginning of the global financial crisis.



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Vacated House in California (2008): Memories of the financial crisis awaken

Photo: DAVID MCNEW / AFP

US Federal Reserve Chairman Jerome Powell has urged the government in Washington to provide more corona aid for households.

Otherwise there could be a wave of mortgage defaults and evictions, Powell said in a hearing for the Senate Banking Committee.

Households may be spending the last of the $ 2,300 billion in aid package that Congress passed in March, Powell said.

"The risk is that they will eventually run out of money and cut their expenses - and maybe lose their home or rental."

Therefore, action must be taken now.

So far, there is no agreement in sight in the dispute about another corona aid package in Congress.

Even after months of back and forth, the two political camps are still too far apart to agree on a new support package.

The dispute is also getting increasingly caught up in the presidential and congressional elections, which will take place on November 3rd in less than two months.

Powell's warnings bring back memories of the start of the global financial crisis in 2007-08.

Back then, mortgage defaults and evictions occurred on a massive scale in the United States when the US housing bubble burst.

Soon, lending banks and loan package holders had to write off heavy debts.

As a result, there was a chain of bankruptcies.

In rows, states had to save their financial institutions - and in doing so, they got into high debt.

The rules on lending in the US are stricter today than they were then.

In politics, however, there are repeated efforts to loosen it.

Icon: The mirror

clh / Reuters

Source: spiegel

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