US Must Strike Fine Balance on Mortgage Bailout

Deficit makes coordinated response economically, psychologically crucial
By Jim O'Neill,  Newser User
Posted Sep 8, 2008 11:34 AM CDT
Treasury Secretary Henry Paulson, Jr., left, and Federal Housing Finance Agency Director James Lockhart, right, exchanges places during their news conference in Washington, Sunday.   (AP Photo/Susan Walsh)
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(Newser) – A global storm continues to threaten the world’s economies, and the US government takeover of Fannie Mae and Freddie Mac is just one step, albeit a major one, toward recovery. Whether the latest attempt to right the ship succeeds "ultimately boils down to two big issues," writes Mohamed El-Erian in the Financial Times. Underlying both is the reality of globalization.

Washington must do all it can to attract both domestic and international investment, allaying the fears of "foreign holders of US debt who have become increasingly skittish in recent weeks," writes El-Erain. And economic policymakers must stop planning ad hoc and learn from, of all entities, the countries that have recently coped with weather disasters, which understand "the importance of a holistic response from the authorities."