President Bush is expected on Thursday to unveil a five-year freeze on interest rates for some subprime mortgages. (Financial Times via MSNBC) Lenders agreed to the plan, which was crafted by Treasury Secretary Henry Paulson to ease a coming wave of foreclosures threatening to tip the economy into recession. Democrats said the plan didn't go far enough. (The New York Times, free registration)
What the commentators said
Paulson appears to have come up with a “promising” fix, said The Washington Post in an editorial (free registration). “This is not a total bailout.” Homeowners will have to keep up with their payments, but by locking in low “teaser rates” for five years the plan will prevent higher rates from kicking in and “socking borrowers” with monthly payments they can’t afford.
Plenty of “people are still left out in the cold” under Paulson’s plan, said Liz Moyer in Forbes.com, and that’s just one reason many homeowners, investors, and others will find fault with it. The fix would only help those still current on their payments who won’t be able to afford the higher rates kicking in come January. Those who can pay won’t benefit.
The politicians are stepping onto risky ground here, said syndicated columnist Froma Harrop in The Seattle Times. “The mortgage free-for-all set off a plague of bad judgments by lenders, borrowers, investors and Wall Street alike.” But Democrats mulling alternative plans should keep in mind that any lifeline that looks like it is rescuing “the McMansion crowd” from their own “folly” is likely to “put Americans in a sour mood.”