Congress Pushes for Unaffordable Housing
Progressives have generally sought to promote affordable housing. We usually think that it is a good idea that moderate income people can buy or rent good housing. However, Congress seems determined to go on the opposite path, striving to keep house prices out of reach of tens of millions of families.
At least this is how the NYT describes the story. According to the NYT, a major purpose of the housing bailout bills before Congress is to keep house prices from falling.
There was a housing bubble in the United States over the last decade. After just keeping pace with inflation for a century, house prices rose more than 70 percent after adjusting for inflation over the years from 1996 to 2006.
Have the NYT editorial writers not noticed this bubble or do they think the housing bubble was a good development that the government should try to foster?
The level of incoherence of the housing policy advocated by the NYT is astounding. Why on earth should Congress act to keep house prices above their market level?
House price supports will not work in the long-run. If we keep house prices high, builders will construct more houses and the over-supply will grow even larger. In this way, a house price support program is like a farm price support program, except we have a $20 trillion stock of housing. The market for most farm products is in the tens of billions of dollars annually.
A house price support program will end up costing the government billions and possibly tens of billions of dollars. Is it better for the government to spend this money (most of which will be paid to banks) supporting house prices than to pay for health care, child care or good rental housing?
Furthermore, since house prices will eventually fall to their market clearing levels, will the NYT policy even help moderate income homeowners? They will be paying far more in housing costs for the years they still in their home than they would to rent a comparable unit. This will be diverting money that they may have otherwise used for their kids health care and child care or other necessary expenses. And, since the house price will fall, they will never accumulate any equity.
So, what is the point of the policy being pushed by the NYT and Congress? If anyone could answer these questions, it would make it easier to take this policy seriously.
Seeing the Trees and not the Forest
Frankly, I'm not convinced the Frank bill will do what The Times editors think it will do, but let's assume that it will.
The purpose of the bill is to halt what many forecast as a spiraling foreclosure crisis in certain areas of the country. Its principal purpose is not to put a floor under single-family house prices but rather to stop the growth in the homes-for-sale inventory by reducing foreclosures.
Secondarily, homeowners will be exchanging mortgages based on bubble prices when taken out in 2005-7 for mortgages based on expected non-bubble prices. How so?
Well, in affected areas home prices are down around 10+ per cent, now; the Frank bill mortgages will be written at 85% of this reduced price. What that means is that these mortgages will be written at just about 100% of reasonable prices -- 10%+15%=75% of bubble prices.
A win-win result!
Note: Whether the Frank bill will cost taxpayers anything, whether government spending ever costs taxpayers anything, is an issue for another day.
May 12, 2008 7:51 AM | Reply | Permalink
Actually, even though this is Washington, we can use arithmetic.
The Frank bill is designed to have the government guarantee bubble-inflated prices on bank loans. It thereby bails out banks, and causes homeowners and taxpayers to waste money. It's a perfect lose-lose (except for the banks).
Here's the deal for those who learned arithmetic. Home prices rose by 70 percent above inflation during the bubble. Since its peak, they are down by a bit less than 15 percent. This puts house prices at about 145 percent of their trend price. Frank wants to guarantee new mortgages at 85 percent of this price, or a bit more than 20 percent above their trend price.
Of course, these numbers are nationwide averages, in the most bubble inflated markets, house prices rose by more than 100 percent after adjusting for inflation. In these markets, house prices have fallen by around 20 percent making them still more than 160 percent of their trend levels. If Frank guarantees these houses at 85 percent of the current prices, that would still put them at more than 35 percent above trend levels.
The excessive guarantee prices mean that homeowners will pay far more in housing costs than they would to rent an equivalent unit, they mean that they will not accumulate equity because the price will fall further when the bubble fully deflates, and they mean that the government will get stuck with the tab as mortgages again go underwater and homeowners default.
If Frank were serious about helping moderate income homeowners, he could set the guarantee price as a multiple of annual rent (e.g. 15 times rent). Since rents were not significantly inflated by the housing bubble, this would be an easy route to protect both homeowners and taxpayers, if this was a priority.
May 12, 2008 9:22 AM | Reply | Permalink
Dean, the problem is that your solution so often comes down to people giving up the benefits of ownership in order ot rent. Renting, though it makes economic sense a lot of the time, kind of stinks. You have to answer to a landlord. You have to ask somebody's permission if you want to have a pet. You get screwed on the deposit when you move. People who own the place they live have all sorts of rights that renters don't.
May 12, 2008 9:25 AM | Reply | Permalink
Let me add to your list.
I didn't realize how good it would be to have "fear of landlord" issues off my back when we bought the place we were renting several years back. First just the fear of him coming round when the house was a mess kind of thing, all gone, no more, you are free.
We had lots of fear when this landlord died because he did so when the lease was up and he had only two heirs and those were overseas, and it wasn't exactly proper to start bothering them whether we would be staying as renters at the funeral. We were in limbo with lots of other stuff going on in our lives, dreading having to move. We had moved to this place forced to move by the landlord selling the house. Now we finally had purchased the paraphrenlia that goes with fitting things into a house and having it work properly (closet stuff, shelving, the right size furniture) and we might have to move again.
Previously
When I was a teen, my parents were waiting on their first and only house to be built. The situation was five kids. including a new baby, crammed into a small flat they had tolerated for years way beyond the intent because there weren't too many affordable four bedroom apartments available to rent to families with 5 kids in a medium-size city. Well, the landlord retired sold the house. My parents had to find a temporary rental to fit us all in until the new house was finished that would rent to someone with 5 kids. It was a dump and those months of having to move two times were a huge stress on the whole family. The end of my high school years were ruined by the whole thing.
In my current situation, in New York, finding another apartment would take me several weeks of time off from income producing work. Moving and adjusting to the new place would take more time away from work and life. We are getting to the age when it's no longer a smart idea to to be trying to move sofas up stairwells, so we would have to pay for a mover. The heirs were open to selling to us, otherwise we'd have to move. Taking the first and last month's rent and the security deposit and moving fees, we were half way to the down payment, the other half was borrowed. The fixed mortgage payment for the rest comes out to $50 less than the rent we were paying, which was due to go up.
Now we have the same "rent" guaranteed for the rest of our lives, and no landlord fear. We don't have any kids, whatever we equity is created can be used at the end of our lives in a reverse mortgage if we are lucky to live so long. It could also be used to borrow against in an emergency if we want to risk having to move again.
Oh and my 80-year-old widower father still lives in that house he built with my retarded brother, the mortgage paid off long ago. If he had continued to rent instead of buying, that house would not be going into a trust for my retarded brother when my father dies, and there would be bupkis for taking care of my retarded brother, the landlords would have that money, and all of us would have to chip in to support him. If my father weren't so ornery, he could have a boarder right now for some of those empty rooms and be getting some more income or some free housekeeping.
There are great benefits not having to be forced into nomad culture when it is not your choice. The reality of rental life in most places in this country is not that of rent control and extreme tenants' rights. To become middle class, especially with a family, you need stability in your living situation.
May 12, 2008 12:20 PM | Reply | Permalink
Thanks Artappraiser. I wish Dean would address this. Given that most rights are given to landlords rather than renters, he's really asking for people to give up a ton.
May 12, 2008 12:32 PM | Reply | Permalink
Oh, that ain't gonna happen, because its clear he's on a crusade to convince people that renting is the better economic model. And I think that ain't gonna happen, because people in this country, especially people with kids, are not going to believe that until there is a huge stock of rental housing under heavy rent control with extremely strong renter's rights. And that huge stock ain't gonna happen in a capitalist system because it wouldn't make any sense for people to be landlords then. I suppose if he wants the U.S. to try the Soviet thing again, where all the real property is owned by the state, maybe it would work this time? :-)
I have another brother who presents the landlord side of situation. He lives in and owns a house in Santa Monica of which half is rented by him. He has some interesting stories to tell about the strong renters' rights in that city, like being stuck living next door to your tenant not paying his rent for a year and trashing the place all the while and spending a ton on attorney's fees to get the tenant out. If the situation is that being a tenant is extremely good, then the situation might also be that being a landlord might suck, and then who in their right mind is going to invest in and run all that rental property?
May 12, 2008 1:53 PM | Reply | Permalink
p.s. Ignore the word "previously" hanging out there in my comment all by its lonesome.
As long as I am commenting again, would like to add that "fear of landlord" is not entirely irrational. Everyone knows that the key to getting a new good rental is a recommendation from the past landlord, if you want nice places to live, you are a slave to impressing and pleasing your landlords.
You did sum it up well, renting sucks. That people can get stuck with dumb mortgages or money pit houses or having to sell when the value of homes are down still does not change the fact that renting sucks more more often.
May 12, 2008 12:35 PM | Reply | Permalink
I think he is addressing those issues, precisely by pointing out the real way to increase home ownership is to get prices back to some realistic relationship with incomes.
In my own market, for example (in the Northeast), I'm renting a single family house. All told, a 30 fixed-rate mortage, PMI, homeowners insurance, and property taxes would be DOUBLE my monthly rent if I bought the very same house at current prices -- let alone 2006 prices. True, there's the tax deduction, but that's more than outweighed by all the deferred maintenance on the 120 year old house.
I've got an especially good deal, but it is typical for my city -- even now, owning here costs 75-100% more than renting in most cases, putting even condos out of reach of anyone earning less than 100k/year.
I absolutely agree with all the points about the insecurity of renting, but the only way to get people into ownership is to get prices back into line.
May 12, 2008 2:28 PM | Reply | Permalink
May 12, 2008 11:40 AM | Reply | Permalink
In some places, most people are renting, because buying is completely out of reach for so many people.
In my area, vacancy rates are low enough that rents will likely be going up because of pressure from foreclosures: there will be more people looking for rental units, and there just aren't that many available.
It was more profitable for builders to put up high-end houses and condos than to build affordable housing, and the building commissions let them do it. (Also, a lot of people equate 'affordable' with 'section 8', never checking with the real world.)
May 12, 2008 11:48 AM | Reply | Permalink
Hi, some of us have been renting all through the bubble, and being sneered at by our homeowning coworkers for being RENters because we had the sense not to buy into the bubble. [I'm speaking as someone who went to college and works at a desk job for what used to be considered decent pay until home prices got so hilariously high.] Is Barney Frank going to compensate me for living in fear of the landlord all this time? I'm sorry someone thought at someone point that a townhouse out in the middle of a field in a bad school district was worth $800,000 in 2006, but that creates no obligation on my part to bail that person out, either as a taxpayer or as a buyer. Home prices will have to fall by a lot more than 10% to look like anything I'm interested in buying.
May 12, 2008 12:34 PM | Reply | Permalink
Folks,
There are several good points here.
First, there are always going to be many people who are renters. (it's currently one-third of households.) That is why it is why we should be fighting to have laws that provide security to renters. It makes much more sense to provide security to renters, so this is not a horrible state of existence (in cities with good laws, it isn't), then to spend tens of billions of taxpayer dollars so that a few of these people can be homeowners. (That's great logic folks -- you want to screw the renters even more with higher taxes, to help out homeowners. )
Second -- PLEASE, PLEASE try to think for a moment. My "own to rent" plan [http://www.cepr.net/index.php/op-eds-columns/op-eds-columns/the-subprime-borrower-protection-plan/]is by far the most effective proposal yet put on the table to keep people in their homes as OWNERS. By taking away the easy option of just throwing people out of their home through foreclosure, the lender will have a real incentive to negotiate terms that allow homeowners to stay in their house as owners. This makes far more sense than setting up a complex mortgage guarantee structure, as proposed in the Frank-Dodd bills.
3) Even if we wanted to do the mortgage guarantee route outlined in the Frank-Dodd bill, why would you ever waste taxpayer dollars setting the guarantee price at a bubble inflated level. As I explained, we can easily avoid setting it at too high a price by simply setting the guarantee price based on rents. Why would Frank-Dodd not go this route? We could help more homeowners at a lower cost if the guarantee price is not set at a bubble-inflated level. Why won't they do this?
May 12, 2008 12:56 PM | Reply | Permalink
As someone who tried to buy a home a couple of years ago but was priced out of my state's market (as a first-time home buyer with a low six-figure income but no prior equity), I have to agree. My wife and I have had to move twice when the landlords decided they were going to do something else with the property. Being vulnerable to being forced to move (with all of _those_ attendant expenses) through no fault of your own completely sucks.
May 12, 2008 12:57 PM | Reply | Permalink
Thank you, Dean Baker. One of the reasons that people took on those exploding ARMs was that renting is, in places without rent control and just cause eviction laws, a miserable experience. It's particularly awful for lower-income people, for people with children, for people who aren't white, and for people who've ever been evicted or have poor credit. (It's not surprising that people with poor credit took on these loans, in particular, as it was easier for them to buy a house--they could fog a mirror--than to rent one.)
After all, one is not required, in any circumstance other than renting housing, to give one's social security number, bank account information, etc. to a total stranger who happens to hold the keys to a house or apartment allegedly for rent. And many states have laws that not only don't forbid such practices, but simply regulate how much the landlord can charge for the information.
May 12, 2008 1:58 PM | Reply | Permalink
Allow me to speculate on a real motivation for the Frank bailout. There appears to be about $5 trillion in outstanding mortgages most of which were issed since 2004 or so. Much of this is packaged into CDOs. These securities are still held by banks, investment houses and a variety of funds and their value, especially for the senior tranches are real, provided that the value of the housing doesn't drop more than 25% of the mortgage. If housing prices continue to fall, and more mortgages go under water and begin to eat into those senior tranches, the banks will be forced to write down the value of their CDO's. There is a potential loss here above $1 trillion. This loss cannot be covered by the markets without massive bankruptcies and possibly a total financial panic. This is also more money than the feds can afford without printing dollars.
Thus this might be another effort by the government to reassure the financial markets. They have already stepped in and made market for the CDOs over the past ten months so the banks wouldn't have to write down their values. Maybe those stop gaps are weakening and this is another level of protection.
May 12, 2008 2:00 PM | Reply | Permalink
Dean Baker is right.
If the solution doesn't involve decreasing both the interest rate and the total loan amount, it will be worthless.
I don't understand this notion that people who can't afford the house they are in (because they were 'tricked' into thinking they could just sell in the eternally rising market) should stay in their McMansion.
I speak as a person on a 'nice' bungalow belt block in NW Chicago - and that block has collected two boarded up houses in the past two years. The result of speculation.
I think it's much more important to revise regulation to tie the mortgage to the bank that made the loan (no more 'churning' of mortgages and then bundling them into securities) so that we don't have banks making loans that have such a slim chance of being repaid.
I'm left of Lenin on most issues - but here Dean Baker is clearly in the right.
May 12, 2008 2:30 PM | Reply | Permalink
KingElvis--
There's nothing ideologically right wing in opposing massive bailouts for banks and investment firms, unless you believe that the left just throws money around willy-nilly. While Dean Baker is probably more conservative than I am on most issues, I agree that we shouldn't be spending money to bail out bankers and investors who (a) should've known better and (b) already have made plenty of money off this debacle.
I do, however, like Maxine Water's bill (which has barely been discussed anywhere), which allows state and local governments to buy up foreclosed properties to keep as affordable housing. Little cost--much benefit.
May 12, 2008 3:18 PM | Reply | Permalink
Okay. First, the problem we are trying to solve is to keep the housing market from going into free-fall. Foreclosures = Glut of cheaper housing = Housing prices plummet = Increasing number of homeowners that are 'upside down' on their mortgage/home price ratio.
At some point, people are going to wake up and go "My house is now worth $400,000, and my mortgage (for whatever reason) is $500,000. It is in my own financial best interests to just mail my house keys back to the bank and walk away.". This is already starting to happen, and it's called 'jinglemail'.
Once that starts happening, you'll see a very rapid cascade of people doing that as more and more homes get handed back to the bank. How low can it go? That's what keeps economists waking up in a cold sweat.
In regards to your 'own to rent' concept, I don't see how it helps anybody. Essentially, the bank ends up owning the house, and the homeowner loses all equity and the title.. And apparently pays less than his mortgage payment to the bank as rent. Plus, it'll drop rental prices as more and more people become renters, which lowers home value.. And, ohyeah, the renter 'appraiser' ends up in a downward spiral of rents.
As far as the banks incentive towards re-negotiating because they don't want to become 'landlords'... The banks won't care. They'll hire management companies if they need to. Don't think they're going to chop huge wads of cash off a loan just because they don't want to be landlords; they already are landlords.
Why not skip the middle step and re-negotiate the loan to begin with? That's what the Frank-Dodds bill would do (if done right). Banks get out of the dangerous mortgages at a mid-sized loss. The owners get refinanced into an FHA loan, probably a 30-year fixed-rate loan @ 4-5%.. Which is what they should have gotten in the first place. The only danger/bailout part of it would occur if housing prices continue to PLUMMET, instead of trend downwards.
Yes, it's dangerous.. But we're really really close to "Utterly Screwed" right now and being in the worst shape since 1929, and stabilizing home prices BEFORE they reach the 'inflation-adjusted' price.. Because everybody who bought a house in the last 6 years would be underwater immediately. See above about 'jinglemail'.
Also, on a more personal note.. Your 'own to rent' idea is worth reading over, and it's possible that with some modifications it can accomplish what you're looking for. But saying that people should "PLEASE PLEASE try to think" and that only you have the correct answer makes you come across as, um, somewhat arrogant..
-steve
May 12, 2008 7:19 PM | Reply | Permalink
A few comments -
I'm very hesitant to back any Federal interference here because of the extreme difficulty addressing local market conditions. You can't treat the LA housing market like Montgomery, AL, or Denver like Charlotte. And Dean is correct that any house price supports will lead to a glut of housing that's still unaffordable.
None of the legislation seems to address a type of borrower I've seen very frequently - during the boom, instead of selling their old home and buying a new one, they kept the old one as a rental, and bought a new one - leveraged. Hmm. What to do here?
Syvanen may very well be correct here that this is another way to assist banks that invested in mortgage CDOs. But before Congress tries to attempt the use of a cudgel here, it isn't a bad idea to wait and see how the Fed rate cuts work - they are a much sharper tool. In my shop, we've already seen a sharp reduction in delinquencies - the rate cuts help.
Though napalmgod does see one of the worst possibilities, it's also good to remember that not all markets are suffering - Charlotte, NC is actually forecast to grow! And much of the midwest did not go through the sustained increases in home prices like areas more prone to speculation - CA, FL, etc.
I think Maxine Water's bill is a good compromise, if it's done locally only - this is how HUD helped in the early 90's in local markets. And this is my principal point - intervention should be done at the local level.
There are larger, long-term issues at stake, which is why we must be very careful with blunt force government intervention. For example, many LA residents can't afford homes in the city, move to more affordable tracts, and commute. This increases traffic, pollution, road costs, sprawl, etc. Many Montgomery residents can afford homes in the main city. A glut of unaffordable homes sends buyers in both places farther from the city and makes things worse.
Dean's own to rent plan is also not a bad alternative, but missed something - depending on the local market. If you no longer own your home, renting in the city is attractive again. Remember, we have $3-$4/gallon gas now. And that is a big deal for families with a 30-45 minute commute each way each day. Then there isn't an incentive to keep the place up.
Lastly, we're seen panicky national headlines from the MSM about the subject, but local data is lacking. It would be good to hear from LA residents and lenders about LA, and Montgomery lenders and residents about Montgomery. And one must wonder how Charlotte homeowners, realtors, and lenders have found a reasonable balance. This is far too complex a problem for hasty and blunt Federal intervention.
May 12, 2008 9:40 PM | Reply | Permalink
The goal of Frank's bill was to help 500,000 families avoid the heartbreak of losing their home. I like that goal.
I won't try to categorize Dean's goal except that it's something other than Frank's.
In his News Hour interview Frank's summary was
Those 500,000 families don't need an elegant solution. They need their homes.
As for the country , accepting that it needs to bring housing back to trend , does that have to happen at their expense. Or would it be enough to move nearer to trend but let them drink coffee Sunday morning in their homes.
As for rentals, accepting that putting those 500,000 families on the streets would help lower rentals is that end worth that means ?
And isn't that particular end going to be partly achieved by the foreclosures that have already happened, and the ones which will continue to happen even if all these 500,000 are helped ?
While I'm at it , I sort of go tilt on the benefit of letting houses fall to the "market level". Markets overshoot. As in a bubble.
On the way down will the decline come to a satisfying halt when prices get back to trend ? Or overshoot again? If so, sure there'll be benefits but also costs . Both of which will affect real human beings. Like art appraiser.
I'm with Barney not Dean.
May 12, 2008 10:09 PM | Reply | Permalink
If Frank wants to keep house prices high, then he wants to make homes unaffordable for moderate income families. That is really awful policy in my book.
Again, I am very sympathetic to people who are over their heads in their current mortgages. Frank's bill, in its current form, will help relatively few of them, regardless of what he claims. Why not cap the guarantee price at some multiple of rent?
It's real simple for those who learned 3rd grade arithmetic and it would prevent people from being stuck with excessive mortgage payments and it would radically reduce the likelihood the government gets stuck making good on the guarantee. If the goal is anything other than helping the banks, why not do it.
As far as jingle mail, I am ALL for it. If the banks are so dumb as to lend money to to buy homes in bubble inflated markets, then we have to teach these billionaire buffoons a thing or too. Let it jingle, let it jingle.
Does this keep the economists awake at night? I sure hope so. If these no-brains had been awake in 2002-2006 they might have tried to stop the housing bubble before it grew to such dangerous levels. Let's hope economists are more awake in dealing with public policy in the future than they have been in the past.
May 13, 2008 6:48 AM | Reply | Permalink
I'm over my pay grade here.
I'd like to see fewer people lose their homes and I'd also like to see affordable home prices for moderate income families, how not ? Probably the sweet spot is at some trade off between the two goals. I place more emphasis, right now, on the first
May 13, 2008 7:11 AM | Reply | Permalink
As a sidebar, it really would be nice if the people in positions of responsibility (I include Frank) would occasionally acknowledge some responsibility. Some of us were yelling about the bubble for years. We knew this disaster was coming and tried to prevent it. Frank and the rest couldn't be bothered. How about a little mea cupla?
May 13, 2008 7:41 AM | Reply | Permalink
It would be nice if some of the people in positions of power took responsibility. For example, the at the bank I worked for, bank examinations went from once a year to once every three years. The regulators had less people working for them. If you know there are fewer cops on the road, do you drive faster?
Well, the mortgage lending industry, including banks, sure did. And I'm with Dean - let it jingle. I don't think that 500,000 families will be out on the streets, because if you can afford even half a mortgage, you can rent. But I like his plan, because it would help keep people in their homes (if they don't have driving issues) and it's not a price support - both the homeowner and lender take a hit.
Don't paint all the banks into one corner, however. There are many community banks who lost business - on purpose - and loan officers I know who told their borrowers point blank that they did not offer interest only mortgages, or lend beyond 80-90%, LTV. They learned hard lessons from the last housing crisis in the late 80s / early 90s. They told their borrowers it was not a wise policy for the customers, the bank or the community. And they carefully underwrote loans. Can't say the same about the larger fish.
May 13, 2008 10:22 AM | Reply | Permalink
Dean,
I completely agree with your point that the solution is much more convoluted than it needs to be if the main purpose was to save as many homeowners as possible. However, I am of the belief that this bill is more about preventing banks from losing all of their equity capital during the next year than it is about saving homeowners. After all, Frank is the chair of the house financial services committee. His main concern is going to be the banking system.
That said, it is a joke that the banks aren't being expected to pay for this bailout (which this effectively is) in the form of higher tax rates going forward or pay restrictions. The government is providing them with a massive influx of cash that they need to, likely, prevent bankruptcy and it doesn't appear that they have to sacrifice anything. It would also help to put the focus on the banks' behavior and not just the "reckless homeowners" (which some admittedly were).
May 13, 2008 10:50 AM | Reply | Permalink
"It's real simple for those who learned 3rd grade arithmetic..."
While I am with Baker on the substantive matter at hand, I must agree with the commenter who called him on style.
The above may cut it in academia (where, oddly, people tend to take you at your own valuation), this kind of snotty posturing won't fly in blog-land.
May 14, 2008 2:45 AM | Reply | Permalink
Re: After all, one is not required, in any circumstance other than renting housing, to give one's social security number, bank account information, etc. to a total stranger
Anytime I have ever opened a bank account or applied for any sort of credit (including a mortgage) I have had to give my SS# to a person whom I have never met before (and may never meet face to face in many cases).
Re: This is already starting to happen, and it's called 'jinglemail'.
Jinglemail is a myth. To the extent it’s happening it involves people who really can’t afford their payments, or “investors” (AKA speculators) dumping properties they will never be able to sell for a profit. People who live in a home and can afford it are unlikely
to dump the place for the simple reason they have to up and move somewhere else, which is a major expense and hassle (and indeed I can testify to that as right now there are movers packing up my house while I type).
Re: If Frank wants to keep house prices high, then he wants to make homes unaffordable for moderate income families.
Houses will not stay high no matter what sort of bailout is done. Their fall may be delayed a bit, but sooner or later they will drift back down to market levels. A case can be made for engineering a slower, soft landing than allowing a spectacular crash (which is mostly what we are getting so far).
May 14, 2008 10:18 AM | Reply | Permalink