This link has been bookmarked by 2 people . It was first bookmarked on 10 Apr 2008, by ignt rn.
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10 Apr 08
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Business.
The package includes more than $40 billion in business tax breaks, including allowing businesses to more quickly deduct the cost of new equipment. The package provides a 50% bonus deduction on new equipment during the year it is put into service, with some exceptions. It also allows faster expensing of property in some cases.
Republicans say previous similar measures brought about a 4% increase in business spending in the first six months they were in effect. The non-partisan Congressional Budget Office in a recent analysis said the impact of such tax breaks was "relatively modest."
Kent Bentsen, president of the Equipment Leasing and Finance Association, which not surprisingly liked the plan, noted that investment in plant, equipment and software made up 15% to 17% of economic output.
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Housing.
The plan tries to make it easier to secure or refinance mortgages for more expensive homes. First it would allow Fannie Mae and Freddie Mac, for a year, to buy loans of up to $729,750. The current limit is $417,000. The package would similarly increase the $362,790 limit on loans insured by the Federal Housing Administration, while making it easier for borrowers to qualify.
The market for bonds containing so-called jumbo loans, those above Fannie and Freddie's current $417,000 limit, has essentially dried up in recent months due to turbulence in the mortgage market. Lenders making such loans are requiring even borrowers with good credit to come up with larger down payments and are charging higher interest rates. That's a particular problem in states like California where the median existing home price is about $490,000.
Richard Moody, chief economist at Mission Residential, says he's skeptical as to how much good raising the Fannie and Freddie limits will do, given lenders' recent, tougher standards.
"When you're talking about a $700,000 house, a 20% down payment is still a good chunk of change," Moody says.
Further, the plan shifts more risk to taxpayers, because FHA loans are insured by the federal government.
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