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A Times Editorial

Taking the sting out of recession

Amid all the spectacular proposals for righting America's economy, two less dramatic moves in the past week promise to help American families and retirees weather this recession. First, Congress voted to postpone rules governing companies' pension fund contributions and those that dictate when a retiree must withdraw from a 401(k) retirement account. The bill is now before President Bush. Then Sunday, loan giant Fannie Mae announced that rather than evict renters living in its foreclosed properties, it would offer them new leases. America could use a lot more of these logical, and low-cost, solutions.

Corporate pension funds, like nearly all investors, have seen their assets erode with the market. Plus they were facing tougher funding requirements under much needed reform passed in 2006. While those reforms are still important — they arose after the government had to bail out underfunded airlines and steel pensions — it's appropriate to provide some flexibility this year. The bill would free up cash to allow these companies to make payroll and investments during the down economy. It would also offer a one-year reprieve to people over 70 who are required to withdraw money from their 401(k) plans and individual retirement accounts or face penalties. Suspending the requirement for 2009 will give individuals' portfolios more time to recover losses and hopefully provide a more secure future for retirees.

Similarly, Fannie Mae's abrupt transition from a loan giant to a landlord isn't ideal. But the alternative — forcing thousands of renters and their families out of their homes strictly because the original owner defaulted on the mortgage — isn't fair either. Fannie Mae said it would sign month-to-month leases with the tenants until the property is sold. The strategy makes sense on many levels. First, Fannie Mae keeps some revenue stream coming in; neighborhoods won't have as many vacant homes; and individual families won't be displaced needlessly. Freddie Mac is considering the same policy, as should private lenders.

Such changes — which don't require a huge taxpayer investment — could stabilize thousands of American households. The country needs more common-sense solutions.

Taking the sting out of recession 12/16/08 [Last modified: Thursday, December 18, 2008 12:38pm]
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