…is that it might not work all that well and screw other things up in the process.
For instance, despite the Fed having spent some $90 Billion dollars (of $500 Billion set aside – 5 months to go!) in efforts to push mortgage rates lower, they’ve drifted off near term lows, and are sitting in the low 5′s.
Granted, rates have dropped (from around 6% to the middle to low 5′s – which qualify as historic lows) since the Fed embarked on this mission, but bear in mind that reduction occurred before the Fed purchased dollar 1 in mortgage backed securities.
Almost $100 billion later and here we are in the same spot.
Which makes it a good time to point out an editorial from today’s Wall Street Journal, which takes the senate to task for considering a proposal to offer fixed rate mortgages of 4%, and the problems this sort of market distortion might cause:
The problems are price-fixing, taxpayer cost, and a misunderstanding of housing trends. True, the government would not set the prices of the houses themselves. But by fixing the price of home financing, the government would be nationalizing one more branch of the housing market. The feds tried this recently with student loans, and the result is that the private market largely collapsed.
In other words, let’s not replace the market-distorting excesses of the past years with an entirely new set of (taxpayer financed, no less) market distortions that may have unpredictable and expensive consequences.
There is more. Go read the whole thing.