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Best Business Commentary
December 7, 2007
Rating Bush’s subprime plan
Maybe it’s “a measure of even-handedness” that Bush’s subprime deal is criticized from several flanks, says Steven Pearlstein in The Washington Post. “Wall Street sharpies and their free-market allies” grouse that it will “undermine confidence in U.S. financial markets.” And some Democrats are straining their credibility by talking as if every at-risk homeowner is “the unwitting victim of an unscrupulous and predatory lender.” Yes, the plan might be unfair to “decent, hard-working Americans” who didn’t “get in over their heads.” Still, that doesn’t make it bad public policy. “In the hierarchy of injustices in the world, giving a bit of a break to people about to lose their homes would hardly be near the top.”
The “teaser freezer” plan might keep people in their houses, “but it will also make them poorer,” says Jack Hough in SmartMoney. If people can’t afford to pay an extra “two percentage points” on their reset mortgage, they can’t afford their house. Even at the lower rate, they will end up spending money they can’t afford on “a no-growth asset” that’s “likely twice as expensive as it should be right now.” They’d be better off investing in stocks. The government and “the less-math-inclined members of my profession” push home ownership as essential to the American Dream. It’s not, “but growing rich” is.
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