FORTUNE: Clinton floated what is perhaps the dumbest solution to the current mortgage mess

[peoli]

(edited for copyright puposes-proud patriot moderator democratic underground)

Hillary's modest proposal (to wreck the housing market)
The current mortgage mess requires a more intelligent approach than the buzzsaw plan floated by Hillary Clinton.
By Jon Birger, senior writer



Hillary Clinton's proposal to freeze interest rates for five years could be disastrous.


(Fortune) -- Hillary Clinton is no dummy. Even her detractors know that. And yet in last night's Democratic presidential debate in Nevada, Clinton floated what is perhaps the dumbest solution to the current mortgage mess I've heard from a top presidential contender.

"I have a plan - a moratorium on foreclosures for 90 days freezing interest rates for five years, which I think we should do immediately," Clinton announced at what was the last Democratic debate before the Nevada Caucus on Jan. 19. A 90-day moratorium on foreclosures would throw a lifeline to some deserving homeowners, though I suspect it would only delay the inevitable for most. That's not my beef.

Where Clinton goes awry is her proposal to freeze mortgage rates for five years, which is essentially a much broader version of a deal President Bush recently hammered out with lenders to assist some subprime borrowers. If Clinton's only goal were to bail out homeowners facing steep rate resets on adjustable mortgages, her plan would work just fine.

For everyone else though, such a freeze would be disastrous. Interest rates on new mortgages would skyrocket - perhaps past 8 percent, as the mutual funds, pension funds and other investors who typically provide capital to the mortgage market shift their money into other investments where the government isn't impairing returns. With higher mortgage rates eroding buying power, the downward pressure on home prices would only increase. Lower home prices would lead to even more defaults, as more folks who'd lost the equity in their homes choose to walk away from their mortgages.

http://money.cnn.com/2008/01/16/commentary/birger_clinton.fortune/index.htm?postversion=2008011617

[Mother Of Four]

1. ......

:banghead:

[bbinacan]

2. I agree with Fortune. n/t

[napi21]

3. I disagree with that Fortune mag. opinion. One of the BIG FEARS now

of homeowners & investors is how many mortgages are goinging to go into default. How many people are going to have to declare bankruptcy because their adj. rate mtg.s are set to readjust very soon. A freeze of those interest rates would stabalize the market. I also doubt very much that it would affect mtg. interest rates for future home buyers. Most mtgs are fixed rate 30 year loans. Other than someone who moves every 2-3 years, it was foolish for anyone to take a variable rate mtg. Mtg. interest rates are not THAT low that money will be pulled out of that market, and I don't see any effect Hillary's plan would adversly affect ongoing rates.

[BringBigDogBack]

4. kick

[BootinUp]

5. Sure, they are trying to scare us. They compete for business and

will sell mortgages at rates to get that business. And the government can handle this crisis if it wants to.

[ursi]

6. she wants to keep home values artificially high! let it crash!

[niceypoo]

7. FORTUNE is a supply sider Bush sycophant magazine

http://www.whitehouse.gov/news/releases/2007/11/20071109-11.html">Don't believe FORTUNE is a Bush-o-nomics supporter?

And I would believe anything they say because??

[Bitwit1234]

8. Golly what experts there are around here.