Thursday, December 04, 2008

Hold on...

In yesterday's New York Times:
On Wednesday, people close to the discussions said that the Treasury had been talking with Fannie Mae and Freddie Mac about ways to drive down mortgage rates to as low as 4.5 percent. That rate is about a percentage point lower than the going rates for such loans.
Am I missing something? Isn't this exactly what caused the whole housing mess?

As much as the Austrians among us may dislike Milton Friedman, he does seem to have an appropriate zinger for every action the government takes. Quote of the day: "The government solution to a problem is usually as bad as the problem."

1 comment:

Anonymous said...

A lot of people have lost their jobs and the economic reports continue to get worse. Fixing the rate will mitigate the disaster looming on the horizon from all the 5/25, 5/1 (?) ARMs resetting though.

I don't think it will create a misallocation of resources to housing on the scale that it was from 2001 through 2006.

My guess: the proposal creates an artificial limit on the supply of homes coming online to the market, but will create a problem where lenders will simply just not lend for new homes at 4.5%. They'd be taking a loss against the prevailing interest rate.

This housing "crisis" is ridiculous. Homes have not been affordable for quite some time. Yet, the government thinks people should have "affordable" housing by mortgaging their futures. Absolutely ridiculous.