Wall Street bailout hasn’t brought needed mortgage relief

By Megan McCloskey

Tuesday, Dec. 16, 2008 | 2 a.m.

The Treasury Department has been practically throwing money off the tops of buildings on Wall Street — more than $300 billion — but so far the wind hasn’t blown much of it to Nevada.

Money from the rescue package has gone to only a handful of Nevada community banks, according to Bill Uffelman, president of the Nevada Bankers Association.

The more intangible question of whether the state has indirectly benefited from the bailout — it was supposed to trigger a loosening in the credit market — is harder to answer.

“It is not clear that it’s working,” said Stephen Miller, chairman of the economics department at UNLV. “And it’s not clear that it isn’t working either.”

In the grip of a recession, the Treasury’s efforts will take time, and so far Nevada is still waiting.

“We see nothing in the data or from anecdotal comments that (the bailout) has impacted Nevada in anyway,” said Keith Schwer, director of Center for Business Economic Research at UNLV.

A congressional oversight panel monitoring the bailout, known as the Troubled Asset Relief Program or TARP, is trying to find answers.

It will hold its first hearing today at UNLV to discuss the effect of the Treasury’s actions and to learn about the economic situation here.

From the banking side, the panel will hear that although the rescue plan has provided some stability, there is still a sense of frustration and uncertainty.

“I can’t say TARP has had a measurable effect on community banking,” said Uffelman, who will be testifying at the hearing.

Analysts are coming to the conclusion, Schwer said, that “monetary policy alone — lowering interest rates and providing reserves for banks — is not going to be enough.”

The missing link is assisting people in the mortgage market, the collapse of which was clearly the initial cause for the crisis, Miller said.

This is of particular importance to Nevada, which has led the nation in foreclosures for almost two years — one reason the panel chose the area for its first meeting.

The bailout was billed as a program that would address the free fall in the housing market, but there has been a reversal in the plan. The Treasury was to buy what are known as toxic assets — in most cases, securities from subprime mortgages — but has spent the money infusing the banking industry with cash, and Treasury Secretary Henry Paulson said last week he wouldn’t buy mortgage-related assets.

Should the Treasury fail to do more to help homeowners avoid foreclosure, House Speaker Nancy Pelosi warned Monday, it might find that Congress will refuse to release the remaining $350 billion of the bailout package.

Rep. Shelley Berkeley said she would vote no if allocating the rest of the money came up tomorrow.

Southern Nevada had a large housing boom in part because of vast speculation in the market.

With aid to individual homeowners, there will be “some people who will benefit who probably shouldn’t benefit,” UNLV’s Miller said. “If we help out those in mortgage difficulty, we may help out a larger share of flippers.”

But given the dire conditions, he added, that might be a scenario that the country just has to accept.

In Nevada, 50 percent of homeowners are upside down on their mortgages, Schwer said.

He will tell the panel today that for Nevada to recover, more resources are needed for mortgage relief.