In early August 2007, amidst declining prices and credit ratings for U.S. mortgage-backed securities and other forms of structured credit, international money markets came under severe stress. Short-term funding rates in the interbank market rose sharply relative to yields on comparable-maturity government securities. For example, the three-month U.S. dollar London interbank offered rate (LIBOR) jumped from only 20 basis points higher than the three month U.S. Treasury yield during the first seven months of 2007 to over 110 basis points higher during the final five months of the year. This enlarged spread was also remarkable for persisting into 2008.
LIBOR rates are widely used as reference rates in financial instruments, including derivatives contracts, variable-rate home mortgages, and corporate notes, so their unusually high levels in 2007 and 2008 appeared likely to have widespread adverse financial and macroeconomic repercussions. To limit these adverse effects, central banks around the world established an extraordinary set of lending facilities that were intended to increase financial market liquidity and ease strains in term interbank funding markets, especially at maturities of a few months or more. Monetary policy operations typically focus on an overnight or very short-term interbank lending rate. However, on December 12, 2007, the Bank of Canada, the Bank of England, the European Central Bank (ECB), the Federal Reserve, and the Swiss National Bank jointly announced a set of measures designed to address elevated pressures in term funding markets. These measures included foreign exchange swap lines established between the Federal Reserve and the ECB and the Swiss National Bank to provide U.S. dollar funding in Europe. The Federal Reserve also announced a new Term Auction Facility, or TAF, to provide depository institutions with a source of term funding. The TAF term loans were secured with various forms of collateral and distributed through an auction.
After more than fifteen years of transition, many countries still experience only sluggish development of market-based housing finance, due to legislative hurdles as well as to low levels of financial affordability, especially on the part of lower and middle income groups. The goal of this study, therefore, is to assist Governments of countries in transition in designing working housing finance markets for their citizens. It is intended to enable decision makers to select appropriate measures for the implementation of different financing schemes. It is designed to show politicians, authorities, the banking community and other interested partners how housing financing policies could be developed and improved, which general housing finance systems could be applied, what experience of some specific solutions has shown and which criteria and information could be used in evaluating, preparing and selecting appropriate policy measures.
The study draws on experience from the most advanced economies of the various financing techniques. Given the heterogeneous experience of these countries, the systems and their application can not simply be copied. Properly adapted to local conditions, however, they are likely to help in laying the ground for new solutions, and thus deserve a closer look from all interested parties.
In general, the economic returns to a college education have proved to be high. But for individual college graduates, the financial benefits are both variable and unpredictable. One important role of government is to provide some protection against those risks so that qualified citizens, regardless of wealth, can and will advance their education. Toward that end, well-designed student loan repayment policies should aim to ensure that borrowers with low post-college earnings do not face unmanageable payment expectations, and that those who are responsible and make manageable payments are not burdened with indefinite repayment obligations.
Such policies would help limit the risks of student loan debt for teachers, public health workers, members of the clergy, and others in lower paying but important jobs that require higher education, as well as borrowers faced with family medical crises and other unanticipated circumstances that contribute to unmanageable repayment burdens. However, the protections should not be so generous that they give borrowers an incentive to work less, earn less, or avoid repaying their loans.
