Trade Trends
links for 2008-02-13

Paul Kedrosky: Paulson's Project Lifeline: The Non-Plan Plan

Paul Kedrosky: Paulson's Project Lifeline: The Non-Plan Plan: I'll say it again: Rates are not the primary reason people are walking away from mortgages. Get that? It's not rates, not rates, not rates. Yes, I know that is the implication in all the nattering about adjustable-rate mortgages -- rate resets are hurting people -- that's not the main cause of foreclosure.

So, what is it, at least at present? It's declining home prices. When people find home prices falling, especially when the value of their mortgage exceeding the value of their home, they walk away and the homes are foreclosed. Freezing mortgage payments, as Henry Paulson's goofy Project Life non-plan plan announced today does in some circumstances, is irrelevant, sort of like hoping that fixing your car's broken window will cause the tires to re-inflate.

Now, the deeper question is this: Is there anything politicians can do to cause home prices to stabilize or go back up? No, blessedly, and that's a good thing in the long run.