This presentation differ from other posts..
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SBL - Accounting services

Well if lower interest rates spur more people to buy houses there would be less supply and thus that would push prices higher. I think that is the idea.

The thing you should question is their belief that higher home prices are a good thing. Most foreclosed houses were bought fraudulently under false pretense by irrational speculators who bought sometimes 10, 20, 50, 100 houses each with fake credit at the top of the largest housing boom/bust in history. They need to be flushed out and housing prices need to return to a rational level. If someone can't afford their house(s) then they need move to something more affordable or rent.

"If extraordinarily low interest rates can boost house prices then the implication would be that house prices will plunge again in 2-3 years if the economy gets back on its feet and interest rates return to more normal levels."

Isn't the implication a little questionable after however many years it was of 'normal' interest rates combined with bloated house prices?

In the long run, when we are all dead, obviously that analysis must be right, but meanwhile, are McConnell & Co. clinically insane to hope for a little more bubble?

Happy days.

The Bad Banks Assets Proposal... ""Even Worse Than You Imagined"

"Dear God, let's just kiss the US economy goodbye. It may take a few years before the loyalists and permabulls throw in the towel, but the handwriting is on the wall.

The Obama Administration, if the Washington Post's latest report is accurate, is about to embark on a hugely costly "save the banking industry at all costs" experiment that:

1. Has nothing substantive in common with any of the "deemed as successful" financial crisis programs

2. Has key elements that studies of financial crises have recommended against

3. Consumes considerable resources, thus competing with other, in many cases better, uses of fiscal firepower.

The Obama Administration is as obviously and fully hostage to the interests of the financial services industry as the Bush crowd was. We have no new thinking, no willingness to take measures that are completely defensible (in fact not doing them takes some creative positioning) like wiping out shareholders at obviously dud banks (Citi is top of the list), forcing bondholder haircuts and/or equity swaps, replacing management, writing off and/or restructuring bad loans, and deciding whether and how to reorganize and restructure the company. Instead, the banks are now getting the AIG treatment: every demand is being met, no tough questions asked, no probing of the accounts (or more important, the accounting). "

~ Yves Smith @ Naked Capitalist

The Bad Banks Assets Proposal...

Ladies and Gentlemen CALL and EMAIL Congress Immediately ... This proposal puts tax payers front and center to take the losses of the Wall Street Banks.

Congressional Zip Lookup

http://www3.capwiz.com/c-span/home/

Stop the Bad Bank Plan ...

Mr Baker,

For someone who presumes to champion the well being of the middle class your silence on the "Bad Bank" proposal has been deafening.

mmckinl wrote, For someone who presumes to champion the well being of the middle class your silence on the "Bad Bank" proposal has been deafening.

Dean can't be everywhere at one time.

Thanks for that reference to Naked Capitalism. Well, given my level of anger after reading it, maybe no thanks. :-)

Republicans really don't mind running up deficits as long as the short-term benefits go to the right people. They want to change the stimulus package in two ways: 1) make it all tax cuts for rich people; and 2) "help homeowners" by giving money to banks.

Journalists are supposed to ask "who, what, where, when, why". Where they typically fall down in econo-political matters is in the why - why are Republicans wanting to get involved in changing mortgage rates; why are they ostensibly concerned with how much Social Security recipients will get 40 years in the future? The answers are usually obvious - they advocate certain policies because they benefit big-money interests in the short term.

My question is, why is it taboo in the media to explain where the short-term benefits go?

Help homeownders to lose $ down the road by giving $ to banks, NAR and of course their constitutients like agents, brokers, builders, and developers, etc.

Potential homebuyers will hold off from buying until the promised-stimulus is actually signed. Sellers will keep their price higher thinking buyers now could afford a higher price with lower rate.

I could see the housing market already improving.

mmckin,

i've written several posts on a bad bank. here's one:

http://www.guardian.co.uk/commentisfree/cifamerica/2009/feb/02/obama-bad-bank-plan

mmckin,

i've written several posts on a bad bank. here's one:

http://www.guardian.co.uk/commentisfree/cifamerica/2009/feb/02/obama-bad-bank-plan

Posted by: Dean Baker | February 4, 2009 1:57 PM

~~~~~

Thanks for the reply. I apologize.

The fact that tax payers may end up losing trillions of dollars to clean up the fraud and greed of Wall Street Banks has me livid.

Please post more on the rip off that the Bad Bank proposals are ... The people need that money for the stimulus and for on going programs such as SSI and Medicare.

As far as SSI there is one fact I think you don't appreciate. I agree that SSI is solvent through 2050 BUT that does not mean the US government has the CASH FLOW to sustain it. Same goes for Medicare.

The interest rate on a home sets the monthly payment! The lower the rate, the lower the payment. Thus a lower payment lets a buyer spend more, the more he spends the more home values go up. The opposite is true with high interest rates!