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Thread: Looks like housing market is about to get big help from the government

  1. #1
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    Default Looks like housing market is about to get big help from the government

    WASHINGTON (AP) -- Treasury Secretary Henry Paulson said Monday that an agreement was near on a proposal to help thousands of at-risk homeowners avoid foreclosures by temporarily freezing their mortgage rates.


    http://www.nytimes.com/aponline/us/A...=1&oref=slogin

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    Default Re: Looks like housing market is about to get big help from the government

    So much for the market's ability to take care of itself.

  3. #3

    Default Re: Looks like housing market is about to get big help from the government

    You sure like to stir the pot, don't you. You like to take a piece of information and make some extrapolation from it that has nothign to do with what the information was.

    The market will always take care of itself. If left alone, the ARMs would adjust to whatever level the market would go to, and those who could pay it would do so, and those who couldn't would either sell or be foreclosed upon. If those who can't make the payments go into foreclosure, the banks will lose money because of bad debt and low resale value. Because of that, the banks would not make those bad offers.

    This rate freeze is only encouraging those who bought bad loans to do so again in the future, since they have not seen the negative consequences that woudl preclude them from making poor decisions in the future. The banks don't seem to mind the rate freeze too much, because they would lose money on foreclosure resale more than forgone interest. But, the investors that make the banking possible stand to lose money, which leaves less money for loans in the future, which makes it harder for people to buy houses, which drives the housing market even lower.

    When the market is left to its own devices, incentives entice people to make decisions that they can handle. Those decisions preclude them from the trouble that is occurring now. Government intervention is only going to make low income people think that they can take these types of loans again. The problem will only get worse.

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    Default Re: Looks like housing market is about to get big help from the government

    The market will always take care of itself.

    Obviously, bankers, investors, consumer groups, and the Secretary of the Treasury think otherwise.

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    Default Re: Looks like housing market is about to get big help from the government

    Yeah but if foreclosures continue without government help, the economy in America and world-wide could collapse. American investors are so greedy that reasonable profit is not good for them anymore. They have to keep pushing for those subprime mortgages.

    In other words the market would take care of itself by destroying itself like a drunk that keeps on drinking until death.

    The government is just desperately trying to look for a way out of this mess. It still might not work.

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    Default Re: Looks like housing market is about to get big help from the government

    Good analogy, Big, and spot on.

  7. #7

    Default Re: Looks like housing market is about to get big help from the government

    This rate freeze is only encouraging those who bought bad loans to do so again in the future, since they have not seen the negative consequences that woudl preclude them from making poor decisions in the future.

    Yes, it's the Moral Hazard scenario. Stopgap solutions such as this will only encourage high-risk behavior in the future. When speculators can operate under the assumption that their downside is limited (or that the Feds will bail them out eventually) then they aren't going to make safer bets, they are going to make riskier bets, or at least operate at the same unsafe risk level.

    I don't think it's the reponsibility of the federal government to do this sort of thing. This must be what GWB meant with the whole "compassionate conservatism" thing.

  8. #8

    Default Re: Looks like housing market is about to get big help from the government

    Except that Big is disengenious in his thread title (a very frequent occurence). The government is looking to help the little people who can't pay their mortgages. The "housing market" as you call it, i fighting that every step of the way (at least, it seems this way to me).).

  9. #9

    Default Re: Looks like housing market is about to get big help from the government

    It looks like I was wrong about one thing. The govt is going to try to exclude real estate speculators from the program, although I don't know how they will be able to do that accurately.

    But here is an interesting quote from the article: "The new program is being aimed at homeowners who have steady incomes and relatively clean repayment histories who could afford the lower introductory mortgage rates but cannot afford the higher adjusted rate."

    These aren't the low-income people who can't qualify for new loans, these are people who made the wrong bet on interest rates. So now they are rewarded with a continuation of the teaser rate? F them.

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