Paulson Mortgage Interest Rate Plan
http://www.bloomberg.com/apps/news?pid= ... refer=home
this smells bad to me...
the proposal they've got to do this only for new mortgages and not refi's seems really smelly. sounds like they're trying to favor new buyers entering the market while not doing anything for the people who are already in the market. one of the features of the bubble though is that everyone who could enter the market in the most marginal fashion had to enter it before it popped -- so we're stuck trying to 'grow' demand through population growth now....
if they allowed people to refi even if they were underwater to lower interest rates that might have a beneficial effect in preventing foreclosure and increasing consumer spending....
this smells bad to me...
the proposal they've got to do this only for new mortgages and not refi's seems really smelly. sounds like they're trying to favor new buyers entering the market while not doing anything for the people who are already in the market. one of the features of the bubble though is that everyone who could enter the market in the most marginal fashion had to enter it before it popped -- so we're stuck trying to 'grow' demand through population growth now....
if they allowed people to refi even if they were underwater to lower interest rates that might have a beneficial effect in preventing foreclosure and increasing consumer spending....
Comments
By beneficial do you mean drag the foreclosures out for a greater period of time? We're talking about loans which the borrower could never afford in a depreciating market during an extended period of flat wage growth, in the midst of a recession and to borrowers who lack the ability to plan ahead. Many of the people who are at risk today will be at risk again tomorrow, bailout or not.
I fear your solution will give us a Japanese style "lost decade" as opposed to the creative destruction favored by capitalism.
hey, its not *my* solution... its just that you might get some who are on the edge of foreclosure make it to the other side and manage to get a monthly payment that they can make it through the downturn with... that seems very weak to me, but less completely pointless than the paulson proposal today...
i also don't know that the solution to the housing bubble is just trying to throw more cheap financing at it... i don't see how it ends until the fundamentals fall back in line with historical averages... which is why the whole approach seems bad to me...