Home sweet home
18th February 2009
Megan McArdle considers the President’s plan.
Well, the obvious point is that it represents a massive transfer to borrowers from lenders and the rest of us. As far as I can tell, there is no penalty for having borrowed more than you could realistically afford to repay–not so much as a speck of dirt on the credit report. The administration’s release talks a lot about “responsible homeowners”, but very few responsible homeowners have payments that amount to 43% of their monthly income. There are exceptions, of course, such as people who have just lost their jobs, but most of the people being helped are, nearly definitionally, people who bought more house than they could afford in the belief that prices would keep rising indefinitely and they would make big bucks. It was leveraged investing, just like a hedge fund, and often at the same kind of leverage ratios.
But I bet they all vote Democrat.