DEBORAH AMOS, host:

Congress is expected to vote on a bill to rescue the housing market tomorrow. The legislation is intended to help hundreds of thousands of struggling mortgage holders and the ailing mortgage giants Fannie Mae and Freddie Mac.

We asked Allan Meltzer, an economist at Carnegie Mellon University, to tell us what the legislation could mean for the U.S. economy.

Dr. ALLAN MELTZER (Carnegie Mellon University): Well, they really delayed doing anything about the problems of those mortgage giants for so long that they ended up with a crisis and they had to do something sudden and desperate.

AMOS: What's your view on the possible downsides?

Dr. MELTZER: Well, the bills aren't going to do a great deal. That means they're not going to do much on the upside and they're not going to do much on the downside. The bigger risk is what's going to happen without the bills. And that is, what are the risks that the taxpayers and the consumers face? I think the biggest risk that they face is that there may be many more bank failures.

Now, bank failures aren't like the Great Depression. When people in the Great Depression faced a bank failure they ran to get cash or gold. Nowadays they just move to another bank. So that's an inconvenience, but it's not a disaster. But it does mean that the losses are going to be pushed on guess who.

(Soundbite of laughter)

AMOS: Let me guess. The taxpayers.

Dr. MELTZER: Right.

AMOS: Dr. Meltzer, is the housing crisis the problem in the American economy?

Dr. MELTZER: It is a problem. I would say that for most consumers the biggest problem is the price of gasoline and the price of food. You know, take an ordinary person who makes the median income, about $47,000 a year. He now - if he drives his SUV to work he pays $100 a week to get to work. You know, it's hard for him to think about buying anything else. He comes home, complains to his wife. She says to him, have you been to the grocery store lately. Under those circumstances he has a hard time paying his credit card debt, maybe paying some of his consumer loans. Those problems still lie ahead of us.

AMOS: Is the U.S. economy in serious trouble or are all of us just focusing on the negatives?

Dr. MELTZER: Well, there are a lot of negatives, and of course the negatives are the news. Will the economy recover? Of course. Will this be the worst crisis that we've ever seen? Of course not. Are the comparisons to the Great Depression accurate? No. I mean, this is a serious problem, but it's not that serious a problem. It's one from which we'll recover.

The big problem we face in the housing market, which gets so much attention, is a hard problem for anybody to do anything about at this point. The reason for that is that the value of the mortgages that are on old houses or houses that are out there are very hard to value until we know what those house prices are going to be. And nobody has a very clear idea as to how far they're going to fall and how fast they're going to fall.

But until there's a good idea about where the housing prices are going to settle, we won't know what the mortgages are worth. And so people who buy and sell mortgages say, well, we don't want to do that right now. We'll lend you money for a day or a week, but a month? That's a long time. Too much can happen in a month.

AMOS: Thank you very much.

Dr. Allan Meltzer is a professor at Carnegie Mellon University and a historian of Federal Reserve policy.

Thanks for coming in.

Dr. MELTZER: Thank you, Deb.

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