NPR had a piece on Morning Edition that discussed proposals to help out people who are facing foreclosure. It focuses on a proposal by Mark Zandi, one of the economists who missed the housing bubble, which would have the government buy up bad mortgages through a complex auction mechanism and then issue new mortgages at lower interest rates to homeowners. The discussion presented criticism from people who did not like the idea of government intervention, but it did not give any assessment of either the government cost per homeowner who retains their home. Nor did it discuss the extent to which homeowners would pay additional housing expenses relative to renting, to live in a house in which they will almost certainly never accumulate equity. These are the key issues in assessing the merit of a proposal like Zandi's and they never even got discussed in this piece. A simple examination of the arithmetic would have shown that Zandi's proposal is likely to look like a bad deal both from the standpoint of taxpayers who want to see their money put to good use and the standpoint of people who want to help low and moderate income families.
--Dean Baker
