Wednesday, February 13, 2008

Who Wants to Be the Lender?

Here are some interesting thoughts from last night's Kudlow & Company about this ridiculous idea to freeze mortgage interest rates for five years.

Kudlow: Arthur Laffer, [Treasury Secretary] Henry Paulson came out with a lot of possible things to help the subprime mortgage market and mortgage markets in general. One of the things that really troubled me Art, is he’s talking about a 5-year freeze, a 5-year freeze on mortgage interest rates that might be in foreclosure. Now I think that is wage and price controls. I think that’s interest rate controls. I think that’s a disaster for the international market. And, it sounds like Hillary Clinton. Now where does a tough guy like Paulson -- usually a very sound thinker, from Goldman Sachs -- where does he come out freezing interest rates for five years?

Art Laffer: I have no idea where he comes out, how he gets something like that. But it’s really a silly idea, Larry. You know you shouldn’t freeze these things. These contracts should be honored as they are. And frankly, people who go and get those mortgage rates and buy those homes, it’s their problem. I mean it honestly is their problem. And if Paulson steps in and tries to bail them out, frankly, it will just encourage people to do it more in the future. It will make the supply of funds for mortgages dry up. Who wants to be the lender?

Kudlow: You know, to his great credit, Senator Obama blasted Senator Clinton in the debate when she talked about a 5-year freeze on mortgage rates. Obama says, hey look, mortgage prices, mortgage rates are gonna go sky high. Nobody’s gonna get any credit. Okay? I think he had that completely right. He probably doesn’t get enough credit for it. But, now, Mr. Paulson is following Hillary! What is this about?