http://wallstreetpit.com/11122-housing-crisis-optimal-policy-to-deal Wed, 08 Feb 2012 22:13:42 +0000 hourly 1 http://wordpress.org/?v=3.3.1 http://wallstreetpit.com/11122-housing-crisis-optimal-policy-to-deal#comment-68833 John Mon, 12 Oct 2009 16:38:22 +0000 http://wallstreetpit.com/?p=11122#comment-68833 I think this administration is going down the path toward principal reduction. This would be a shame as it would undermine faith in our capitalist system, alleviate responsibility on the homeowners who paid overblown prices, and tend to prop up still-too-high housing values. While all this plus collateral damage is inevitable if they follow this path, it would have little to no effect on the crisis at hand and would in fact stretch it out as it undermines market forces. For a housing market to work, at the end of the day people have to want to buy houses and feel comfortable that the market is not subject to manipulation by the government. Fortunately I think that any principal reduction plan (bank/investor and/or taxpayer-supported) may be the most difficult path to follow through on, as it will bring out the lawyers in droves. I think this administration is going down the path toward principal reduction. This would be a shame as it would undermine faith in our capitalist system, alleviate responsibility on the homeowners who paid overblown prices, and tend to prop up still-too-high housing values. While all this plus collateral damage is inevitable if they follow this path, it would have little to no effect on the crisis at hand and would in fact stretch it out as it undermines market forces. For a housing market to work, at the end of the day people have to want to buy houses and feel comfortable that the market is not subject to manipulation by the government. Fortunately I think that any principal reduction plan (bank/investor and/or taxpayer-supported) may be the most difficult path to follow through on, as it will bring out the lawyers in droves.

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