Comments on: The most important paragraph I’ve read all week http://www.crazybutable.com/weblog/archives/2008/04/11/the-most-important-paragraph-ive-read-all-week/ A weblog for people who otherwise wouldn't. Mon, 13 Oct 2008 08:37:46 +0000 http://wordpress.org/?v=2.2.2 By: Geof F. Morris http://www.crazybutable.com/weblog/archives/2008/04/11/the-most-important-paragraph-ive-read-all-week/#comment-197110 Geof F. Morris Mon, 14 Apr 2008 18:41:01 +0000 http://www.crazybutable.com/weblog/archives/2008/04/11/the-most-important-paragraph-ive-read-all-week/#comment-197110 Been thinking about this myself. I think you want to help people who can pay for a house stay in a house---if they can afford their house with a 30-year, fixed-APR, government-secured loan, let's help them stay in their house. There is a social good to keeping those folks in their homes. But as for speculators and people who were clearly trying to live well above their means, well ... sorry. Now, as for the companies who over-extended, the issue is, as you note, far thornier. But we made it through the S&L crisis, y'know? The cure for market liquidity is going to be artificially low interest rates, which was part of the problem in the first place. [The far, far larger issue was that the securitization of mortgages as re-packaged financial instruments made the process of making a loan offer into a commission game, which meant that the people out in the field making the loan offers to folks had a significant benefit to fudging the numbers to make their commission.] Also, this will certainly drive inflation and other nasty things, but I'm afraid of financial system failure being a worse ill than all that, y'know? Been thinking about this myself. I think you want to help people who can pay for a house stay in a house—if they can afford their house with a 30-year, fixed-APR, government-secured loan, let’s help them stay in their house. There is a social good to keeping those folks in their homes. But as for speculators and people who were clearly trying to live well above their means, well … sorry.

Now, as for the companies who over-extended, the issue is, as you note, far thornier. But we made it through the S&L crisis, y’know? The cure for market liquidity is going to be artificially low interest rates, which was part of the problem in the first place. [The far, far larger issue was that the securitization of mortgages as re-packaged financial instruments made the process of making a loan offer into a commission game, which meant that the people out in the field making the loan offers to folks had a significant benefit to fudging the numbers to make their commission.] Also, this will certainly drive inflation and other nasty things, but I’m afraid of financial system failure being a worse ill than all that, y’know?

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