New Bailout

This article brought up some interesting ideas to me in how we bailout consumers from the ongoing financial crisis.

When I think about it, having the government continually lower borrowing costs to push mortgage rates down and having Fannie and Freddie continue to buy up mortgages at these low rates seems like one of the best solutions to the overall problems. Surely it is better than bailing out the Big 3 automakers. By encouraging affordable refinancing, it will help spur home buying and refinancing. It rewards people who are continuing to pay their mortgages because it lets them refinance. It helps people who may be facing a large ARM reset. Those two things will help keep people in their homes without rewarding people who over-leveraged themselves during the housing bubble. And fewer foreclosures will slow the down spiral of home values. Maybe it even keeps a few more real estate people employed. Refinancing also helps resolve problems where mortgages are tied up in sliced and diced into derivatives and can’t be modified.

Lenders have already learned their lesson and are much more selective about making loans, and the collateralized debt market has already imploded and won’t recover for quite a while. So the largest systemic dangers have already been scared away.

If the government is actively pushing down mortgage rates at least it seems like the right way to go about re-inflating the markets. Plus, I want to save some money.