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We Can Escape This Jobless Recovery

Posted at 1:56 p.m. EDT on Thursday, April 18

Lately, I've been hearing a lot about how housing can't save the economy, that it isn't big enough, that it can't do that much to move the needle.

I hear the same thing about the oil and gas business, that no matter how much we find it doesn't put a lot of people to work and the trade off, the increased use of fossil fuels, makes it so it's not worth supporting.

Let's see. How can I be diplomatic about these pessimistic judgments? How about this? They are all lies, lies that are keeping the federal government from helping the cause instead of hindering it.

First, housing punches above its weight. We know from the retailers and the homebuilders and the bankers we talk to that one dollar toward the purchase of a house can produce an additional $6 in spending to fix it up, make it bigger or gussy it up inside. That's why it needs to be supported and encouraged, because it can produce so many jobs. Instead the government's made it very difficult to get a mortgage, which has kept housing from breaking out to levels anywhere near where it used to be.

But what did Richard Smith, CEO of Realogy ( RLGY), the largest realtor in the country, say about the government's role in promoting the ability of people to get mortgages?

He said that "the only thing holding lending back is the extraordinarily difficult underwriting standards." That's because the feds have still not finalized the rules for banking under Dodd-Frank. The government has simply not spelled out the definition of who is qualified to get a residential mortgage. Without that definition banks are reluctant to give a mortgage to anyone except those who don't need one. Right now the FICO score for Realogy's book of business is extraordinarily and punitively high 760. I don't know anyone who can qualify at that level. That's wrong and it is truly stymieing the economy.

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