The Treasury Department is strongly considering a plan to intervene directly in the mortgage industry to dramatically force down rates and stimulate the moribund housing market, according to sources familiar with the proposal.
Under the initiative, the Treasury would offer to buy securities that finance newly issued loans for home purchases, according to the sources. But to participate in the government’s program, mortgage lenders would have to set exceptionally low interest rates, for instance, no more than 4.5 percent for traditional, 30-year fixed-rate loans.
We never learn from our mistakes, do we? One of the main causes of the credit crunch was the over-exuberance in the housing market, fueled throughout this decade by suspect lending standards (e.i. subprime mortgages) and low interest rates. So why is it that the solution to our poblems today is the same as the cause of yesterday’s problems? It just doesn’t make sense.