Fed action to ease credit markets will help the housing market.(HOUSING WOES)

Kiplinger Letter, The, March, 2008

Fed action to ease credit markets will help the housing market.

But not by much. The move to lend $200 billion to 20 big banks in exchange for debt backed by mortgage securities is mostly intended to thaw vital secondary credit markets and restore investor confidence.

The Federal Reserve wanted to halt the rise in mortgage rates prompted by crumbling faith in even top-rated bonds sold by Fannie Mae and Freddie Mac. It's a big move and a step in the right direction. But by itself, it won't turn the tide of the housing market or the economy as a whole. What's needed is some news that the economy is responding.

Congress will lend Fannie Mae and Freddie Mac a helping hand. Lawmakers want to make permanent the temporary higher loan limits granted...