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The NYT Likes the House Housing Bill
Readers can infer the NYT's approval based on the "Homeowner Rescue Plan Passed Despite Veto Threat." article's headline Supporters of the plan undoubtedly like to call it a "homeowner" rescue plan, but that does not make it an accurate description of the plan.
This bill, the central feature of which is having the FHA guarantee new mortgages to replace one's currently facing default, would first and foremost be helping the banks who hold bad mortgages. All the checks get written to banks, not homeowners. Banks get to decide which mortgages qualify for the program, not homeowners. Congress also opted not to put in price guarantee restrictions that would have prevented the guarantees being set at bubble-inflated prices.
The headline could have read with at least as much justification "Bank Rescue Plan Passed Despite Veto Threat." This headline involves some very serious editorializing.
--Dean Baker
COMMENTS (7)
This is off message, but I just couldn't resist.
Alan Greenspan -- the one who didn't see the credit crunch coming -- reassured everyone yesterday that the worst of our credit woes is over!!!
Sooo ... we can now all relax and go back to spending ourselves silly.
Posted by: Anonymous | May 9, 2008 10:06 AM
I know this is O/T but for some reason the 'No Economist Left Behind' challenge is now behind some sort of CEPR firewall and requires a login. Which I wouldn't mind providing if I could figure out how to sign up but is kind of a high hurdle for someone simply trying to meet an open challenge. The link I have been using is:
http://www.cepr.net/index.php/the-no-economist/policy-analyst-left-behind-test-for-social-security/
Posted by: Bruce Webb | May 9, 2008 10:09 AM
BTW, Real March imports of oil are down, big time. Just another data point that shows refiners (consumers of crude) are not operating anywhere near full capacity.
If you gave me a $7 crack spread in May, I wouldn't produce refined gasoline either. Not with the risks attributable to the industry (fire breaks out and lawsuits follow).
Posted by: Jay | May 9, 2008 11:23 AM
I saw Krugman and Barney Frank discuss this fact early last week. Krugman had been saying that the bill wouldn't really help homeowners and that it would provide enough benefit to turn the economy around, but then Frank referenced the Brady bonds in Mexico and their outsized psychological impact. Krugman concurred that Frank's deal could provide the psychological effect for the markets in order to increase the availability of capital. So Frank seems pretty honest that the bill is really a small bailout for the financial markets so that credit can be available again. He admits that the styling of the bill is purely for political purposes.
Posted by: Tucker | May 9, 2008 12:21 PM
I have an off-topic question; you have written that our $6 trillion national debt is not as bad as it looks because our economy is large enough to handle it. How do you feel about the $50 trillion private debt?
thanks,
Edward
Posted by: Edward | May 9, 2008 1:59 PM
Brady bonds??!! Brady bonds!!?? As I recall, those enabled the poor people of Third World countries to pay off the mistakes of US banks. Oh, yeah, just like the Brady bonds.
Posted by: PeonInChief | May 9, 2008 4:24 PM
Yes, the Bill is a just one more scam in the housing mess, designed to benefit special interests that created the mess in the first place. (Lenders CHOSE to lend money under those terms!) But, it wouldn't be so easy for these special interests to get away with this IF an Economist somewhere would come up with a more reasonable, i.e. equitable, plan.
I'm not an Economist and I don't have an answer, yet. But I do believe the first step is to require anyone refinancing (or financing) to a program backed by a GSE to accept a RECOURSE condition. Next, it seems just as reasonable to suggest ANY resolution must begin by addressing any resolution on a house-by-house basis. Think about this, doesn't it make sense that Mtg. holders don't want this because it will make the lenders look utterly ridiculous, and thus harder to empathise with?
I hope eveyone will take an hour tonight to listen on his/her www.npr.org station to "This American Life." Here's a 13 minute teaser: http://www.npr.org/templates/story/story.php?storyId=90327686
Posted by: bailey | May 11, 2008 10:18 AM