Strategic Communications and Marketing News Bureau

Confidence a key to recent economic initiatives, U. of I. expert says

Economist Anne Villamil says propping up faith in an economy teetering on the brink of recession is as important as more tangible initiatives such as financial lifelines for cash-strapped mortgage lending giants Fannie Mae and Freddie Mac.

Economist Anne Villamil says propping up faith in an economy teetering on the brink of recession is as important as more tangible initiatives such as financial lifelines for cash-strapped mortgage lending giants Fannie Mae and Freddie Mac.

CHAMPAIGN, Ill. – Restoring confidence in the sputtering U.S. economy is at the heart of recent moves to shore up the nation’s lagging financial and housing markets, a University of Illinois economist says.

Anne Villamil says propping up faith in an economy teetering on the brink of recession is as important as more tangible initiatives such as financial lifelines for cash-strapped mortgage lending giants Fannie Mae and Freddie Mac.

“Savers must be confident that they will have access to their funds,” she said. “Borrowers must be confident they can obtain credit. Maintaining the confidence of foreign lenders is especially important.”

China and Japan are the two top stakeholders in the growing U.S. foreign debt, and jitters could affect future loans, Villamil said.

Japan also has a reported $56 billion stake in Fannie Mae and Freddie Mac, which own or insure 40 percent of U.S. residential mortgages and would qualify for unlimited amounts of government credit under a House bill approved Wednesday.

“When you are a debtor, as the U.S. now is and will be for some time, it is important to have a good relationship with your lenders,” she said. “Were the U.S. to face difficulty finding lenders abroad, interest rates would rise and the U.S. economy would be under even more pressure.”

The House bill also includes $300 billion to provide affordable mortgages for struggling homeowners and a $7,500 tax credit for first-time home buyers. Senate approval is expected within days, and President Bush earlier dropped a threat to veto the legislation.

Villamil says the housing market and U.S. economy continue to struggle despite aggressive moves by the Federal Reserve, Treasury Department and Congress. Overall, home prices continue to fall and default rates continue to rise.

“Surging energy prices add to the strain, as do the rising levels of U.S. government debt and consumer debt,” she said. “Unfortunately, there is no quick fix for this adjustment problem. These problems will continue to be challenges for the new administration.”

Villamil is a co-editor of the Annals of Finance and an associate editor of Economic Theory, the European Economic Review, and the Quarterly Review of Economics and Finance. Her research has examined financial contracts and the impact of inflation on public finance.

Editor’s note: To reach Anne Villamil, e-mail avillami@illinois.

Read Next

Life sciences Portrait of the research team posing together.

Minecraft players can now explore whole cells and their contents

CHAMPAIGN, Ill. — Scientists have translated nanoscale experimental and computational data into precise 3D representations of bacteria, yeast and human epithelial, breast and breast cancer cells in Minecraft, a video game that allows players to explore, build and manipulate structures in three dimensions. The innovation will allow researchers and students of all ages to navigate […]

Arts Photo of seven dancers onstage wearing blue tops and orange or yellow flowing skirts. The backdrop is a Persian design.

February Dance includes works experimenting with live music, technology and a ‘sneaker ballet’

CHAMPAIGN, Ill. — The dance department at the University of Illinois Urbana-Champaign will present February Dance 2025: Fast Forward this week at Krannert Center for the Performing Arts. February Dance will be one of the first performances in the newly renovated Colwell Playhouse Theatre since its reopening. The performances are Jan. 30-Feb. 1. Dance professor […]

Honors portraits of four Illinois researchers

Four Illinois researchers receive Presidential Early Career Award

CHAMPAIGN, Ill. — Four researchers at the University of Illinois Urbana-Champaign were named recipients of the Presidential Early Career Award for Scientists and Engineers, the highest honor bestowed by the U.S. government on young professionals at the outset of their independent research careers. The winners this year are health and kinesiology professor Marni Boppart, physics professor Barry Bradlyn, chemical and biomolecular engineering professor Ying […]

Strategic Communications and Marketing News Bureau

507 E. Green St
MC-426
Champaign, IL 61820

Email: stratcom@illinois.edu

Phone (217) 333-5010