Wednesday, January 23, 2008

Rate cuts and stimulus

Rah rah for the interest rate cut and all that, but doesn't do much to address one of the basic problems -- interest rates that are resetting on mortgages of all types. Yes, some people will be able to refinance mortgages at the amazingly lower interest rates, but a whole lot of adjustable rates have obscene prepayment penalties that will make refinancing very difficult, if not impossible.

The interest rate cut might be like stitching up a scratch on the left arm when an artery is cut on the right.

And be wary, very wary, of any stimulus plan proposed by President Bush. Tax cuts for businesses won't help the real estate market and tax cuts for individuals likely won't be enough to help financially-drowning folks get out of the riptide. The Dems aren't doing a whole lot better: Hillary Clinton is proposing a three-month moratorium on foreclosures and a logical question is this: what the hell good is that going to do? Is having more debt when you lose your house the answer to the economy's woes? Barack Obama is proposing, among other things, a $250 tax credit for workers. Be still, my heart! He also is east proposing a $10 billion bailout to help homeowners facing foreclosure. That's not enough, but at least he is aiming in the right direction.

Unless Congress enacts some fundamental mortgage industry reform, a lot of people are going to lose their houses and a lot of decent landlords are going to lose their investments (a lot of slumlords are going to be hit hard, too, but the correct response to that is: "too bad, so sad"). Congress usually fails on the important stuff, so don't expect real reform anytime soon.

It looks like the next few years aren't going to be much fun, economically speaking. Congress, should it get its act briefly together, should not wait too long to extend unemployment insurance benefits. Folks might lose their houses and their jobs, but let's try to make sure they have enough to pay the rent and to keep their families together until things get a little better.

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