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Bernanke Joins the Idiocy

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December 04, 2008 – Comments (1)

Here's Ben applying all of his enormous mental faculties toward a novel solution to the problems wrought by bad lending, overpriced houses, and cheap interest.

Make borrowing cheaper.

Bernanke suggested Congress lower lender's upfront insurance premium as well as reducing the interest rate borrowers pay, which presently is quite high, roughly 8 percent. To bring down this interest rate, Treasury could buy Ginnie Mae securities, which fund the mortgage program, or Congress could decide to subsidize the rate.

Another option would ease the terms of a loan-modification plan put forward by the Federal Deposit Insurance Corp. that seeks to make monthly mortgage payments more affordable. The FDIC put this plan into effect at IndyMac Bank, a large savings and loan that failed earlier this year, and has used it to modify mortgages at other financial institutions.

Under the so-called IndyMac plan, struggling home borrowers pay interest rates of about 3 percent for five years. Rates are reduced so that borrowers aren't paying more than 38 percent of their pretax income on housing. Bernanke suggested this threshold could be lowered to perhaps 31 percent of income, with the government sharing some of the cost.

This is exactly the brainless "solution" that embedded policy makers tried in past, historical bubble bursts, and it always, always failed.

And this all comes from the same rubber-stamp who carried Greenspan's briefcase for all those years, and helped easy all shirk the Fed's duty to regulate lending. They let lending get too cheap, too lax, and it brought on an unprecedented financial collapse. For months now, Bernanke has tried to fix it by making lending cheaper, extending credit on the backs of responsible taxpayers to prop up a minority of greedy bankers and greedy/ignorant homedebtors who took on more debt than they could handle precisely because it was so cheap: It was driving up prices, and all figured they could refinance their way out of the payment problem in a year or two.

That didn't work, and neither will Bernanke's idiotic attempts to toss more money at the overpriced assets.

1 Comments – Post Your Own

#1) On December 04, 2008 at 2:47 PM, ByrneShill (77.61) wrote:

Hmmm,the best case scenario is a temprorary bump in RE, for maybe the first month. If I had a house for sale I'd wait for that idiot to get his way and lower my price at exactly the same time to get out of the market.

Anyone had the balls to ask him what would happen to prices when the subsidy would run out? Honestly, the only way to prop up prices would be for the government to buy a bunch of houses and burn them down. Now that's something I'd like to see.

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