Further Progress on Housing Finance

Senior Finance Executives Cautiously Optimistic about Business Prospects, but Uncertainty Challenges

Under the proposal, private investors rather than taxpayers would fund mortgages and take on the risks and rewards of housing investments. Todays Economist Perspectives from expert contributors. New rules would foster increased use of covered bonds, under which a pool of private assets rather than a government guarantee protects investors against losses. The legislation further seeks to ensure that smaller banks continue to play a role in housing finance. The Hensarling approach thus has the desirable features of moving to a housing finance system driven by private incentives while protecting taxpayers and ensuring the participation of banks of all sizes.

Although some companies will always hold their cash, the responding finance executives understand the downsides of holding large cash reserves. The risks of holding cash most frequently identified by the finance executives are limiting innovation and new product development (52 percent) and holding back growth opportunities (49 percent). Finance executives also say holding cash risks limiting market share expansion (46 percent), geographic expansion (42 percent) and new market entry (40 percent). “CFOs, pursuing growth, appreciate the importance of investing cash wisely, but they need clearer visibility of their business to make confident use of resources,” said Schulman.

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