No Increase in Debt Ceiling Could Crash the Housing Market
NPR looks at how the ongoing struggle between President Obama and the Republicans is affecting the economy, particularly housing. The concern is that if it appears that the U.S. is going to default on its debt, then the global marketplace will abandon U.S. treasuries.
Reporter Chris Arnold summarizes:
"Here's how this would work: If the debt ceiling isn't raised, the U.S. Treasury could default on its debts. The Treasury says it would run out of the money it needs to make payments on some of its Treasury bonds...[then] investors could demand higher interest rates to loan the U.S. government money. But it could also drive up interest rates for all kinds of things, including home loans. If Treasuries are no longer sacred, what about home loans that are guaranteed by the government-backed mortgage firms Fannie Mae and Freddie Mac? [A]nother crash in housing could bring the banking system with it. An actual default on Treasury bonds could be even worse."