The Right Stimulus, Cont.
7:58 AM, Feb 5, 2009 • By MATTHEW CONTINETTI
The rest of Glaeser's piece is an argument against Mitch McConnell's mortgage-refinancing plan, reportedly developed by former Bush economic adviser and current Columbia Business School dean Glenn Hubbard. The proposal is extremely controversial and a lot of folks -- including me! -- aren't sure what to think about it. Larry Lindsey outlined a similar plan in our pages several months ago. But the refinanced mortgages in the Lindsey plan would be "full recourse" loans:
Not sure if that is the case with the McConnell plan.
The larger point, however, is that these refinancing plans are intended to help banks and mortgage lenders get rid of the uncertainty plaguing their balance sheets. A lot of the bad mortgages would be refinanced with an explicit government subsidy under the new plan. That might help quell the price uncertainty surrounding the mortgage-backed securities at the center of the financial crisis. In other words, regardless of the merits of his proposal, McConnell is making a good-faith effort to get to the heart of the problem. Where are the Obama administration's housing and bank-rescue plans again?
UPDATE, 9:17 a.m.: Greg Mankiw has more on the GOP mortgage plan here.