U.S. not yet half way through home mortgage trouble: Seidman

(William Seidman is the former chairman of the Resolution Trust Corp., the agency Congress set up in the 1980s to clean up the savings-and-loan lending mess. He's also a former chairman of the FDIC. He spoke with Reuters this week on the housing rescue plan taking shape in Congress and on the state of banking in the United States.)

How important is this Senate housing rescue plan?

The Senate plan will certainly be some help. It will take a part of the problem in the financial system and perhaps cure 25 percent of it. It isn't an answer to all the problems we have.

Were you expecting to see a lot more, at least coming from Washington?

I think it's as much as they can do with the subprime mortgage issue. The real job will be to get the financial system back on its feet and that's going to be largely a private sector exercise, I think, with a substantial number of bank failures.

Where are we on that curve now?

Generally banks start to fail about a year after the events which cause the trouble. We're probably about seven or eight months down that year. So before the end of the year, we'll probably see a number of bank failures, particularly in Florida, Texas, California, Nevada, where the housing boom was.

So these are local or regional banks attached to the local residential or commercial markets?

Exactly