by Calculated Risk on 4/09/2008 04:13:00 PM

Luke Mullins at the U.S. News & World Report interviews FDIC chairwoman Sheila Bair today: FDIC Chief Calls for a Housing Rescue

Bair believes the Bush / Paulson voluntary approach to loan modifications is insufficient, and that government intervention is needed. Here is her justification:

Q: Why does the foreclosure problem warrant government intervention?

Bair: I am increasingly concerned about the foreclosure rate and the potential for a downward spiral, where we have too much inventory, additional foreclosures adding to inventory, which forces home prices down, meaning fewer people can refinance—leading to more foreclosures and more downward pressure on home prices. If this downward spiral takes hold, there could be much broader ramifications for the economy as a whole. So I think we need to come to grips with the need for government intervention. It's not politically popular. We just need to be honest with people that we have a significant problem here and that additional measures are going to have to be taken. And yes, it may cost money.