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Hank Paulson Throws More Crap at the Wall, Hopes It Sticks
Why Paulson reminds me of Dory the fish.
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Every time I read about a new Hank Paulson save-the-economy initiative (there’s a new one every day!), I think of Dory the fish from “Finding Nemo.”

Except when Dory sings “Just keep swimming, swimming, swimming,” I picture Paulson at his desk warbling “Just keep flailing, flailing, haw, haw, haw, haw, haw, haw!”

Anyhoo, the latest condiment on the crap sandwich is Paulson’s new plan to artificially prop up the housing market and boost sales by lowering mortgage rates to 4.5 percent:

The Treasury Department is contemplating a proposal that would cut mortgage rates for new loans for homes, according to the Wall Street Journal. The plan would employ Fannie Mae and Freddie Mac to offer mortgages with rates as low as 4.5%, roughly 1% lower than current rates.

The measure is under consideration as part of the Treasury Department’s continued effort to limit foreclosures, which has been at the core of the financial crisis. The plan would seek to revitalize the financial market without bailing out homeowners and lenders, the Journal reported.

As part of the proposal under consideration, Treasury would buy mortgage securities backed by Fannie Mae and Freddie Mac, in addition to those guaranteed by the Federal Housing Administration.

Fannie Mae and Freddie Mac guarantee a significant chunk of all new mortgages in the United States.

…Conrad DeQuadros, an economist at RDQ Economics in New York, said lower mortgage rates should provide some support to the housing market by allowing cheaper financing to new buyers with solid credit profiles to the housing market. But he added that a greater impact would be felt if the proposal also permitted refinancing opportunities. However, he also expressed some skepticism about the extent of the impact.

“There is still a massive supply of homes on the market and consequent expectations of further declines in home prices may still keep buyers away,” DeQuadros said. “In addition, the weakness in the labor market appears to be intensifying and rising unemployment will depress housing demand and increase delinquencies. As with all of the Fed and Treasury programs, any new plan will have to be given time to work before judgment on its effectiveness can be made.”

Henry Blodget has a good analysis of Paulson’s latest effort at throwing crap at the wall and hoping it sticks: “Best case scenario, in our opinion, the new plan will slow the rate at which house prices are falling and make the ‘adjustment’ to the new reality less violent. It will probably also stretch out the time it takes the country to work through the crisis (by postponing the inevitable). Given the rate at which the economy is deteriorating, however, shallower-but-longer may just be better than deeper-and-shorter.”

ORDER IT NOW

I have said for the last 11 months (and many readers agreed) that we needed to just suck it up and let a natural correction in the housing market take place. Just get it over with. But the flailing feds are hell-bent on prolonging the pain and preventing the inevitable from happening for as long as possible.

What do they do? Just keep flailing, flailing, flailing…

(Republished from MichelleMalkin.com by permission of author or representative)
 
• Category: Ideology • Tags: Blogosphere, Subprime crisis 
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