Bush, Bernanke Give Markets Hope

Aug. 31, 2007 — -- With home prices falling for the first time in decades and mortgage rates rising faster than thousands, maybe millions, of homeowners can afford, President Bush and the chairman of the Federal Reserve launched a double-barreled action today to calm nerves.

"It was extraordinary to see both the chairman of the Fed and the president to talk about housing today," John Silvia, chief economist at Wachovia, told ABC News' John Berman.

In the next two years, about 2 million homeowners will see their adjustable rate mortgages reset to higher, more expensive levels. One study shows that those higher monthly payments will force more than 1 million people out of their homes by 2012.

Today the president announced a new program that would allow an estimated 80,000 homeowners to refinance into a federally insured program with lower rates.

"This means that many families who are struggling now will be able to refinance their loans, meet their monthly payments and keep their homes," Bush said.

His new plan offers relief for only a small fraction of those in trouble, but it is more about a message of reassurance, with consumer confidence shaky and investors jittery that housing problems will drag down the rest of the economy.

Analysts warn that a more universal bailout would encourage the kind of reckless loans that created the crisis.

"If you were to pay everyone's gambling debts in Las Vegas, then everyone can gamble without limits," said Christopher Cagan of the First American Corp.

That was the message from Federal Reserve Chairman Ben Bernanke as well, as Wall Street hung on the words of his speech at a closed-door meeting in Jackson Hole, Wyo.

Some have been calling for Bernanke to step in fast and cut interest rates to boost the economy — much as former Fed chief Alan Greenspan did again and again during his tenure.