11-21-2008, 03:07 AM
Stizzealth wrote:
Neither situation is particularly desirable. Markets are inanimate, but they are driven by people, and people tend to be reasonably intelligent. You do ignore one VERY important favor, though- with either of your interpretations, it would be logical for interest to continue to accrue. This places an even further strain on the borrower, possibly effectively negating the effect of having an extra 90 days.
Plus, the banks need the money NOW. There continues to be a liquidity crisis. When there's no lending capital in our economy, the economy stagnates. If the Fed continues to print money, it drives inflation which is no good for anybody. It's much better to repurpose money that is already in the system. However, this money is locked up in houses that are worth less and less every day as the housing bubble continues to collapse.
Continuing on my point that markets are smart, I find it hard to believe that anybody on the floor of the NYSE or Nikkei or wherever, for that matter, could be fooled by a foreclosure freeze. The fact of the matter is that the majority of the houses WILL have to come on to the market in a depressed economy. There will be lots of supply but not a lot of demand as people tighten their belts heading into a recession. It is in our best interest to get the houses on the market as soon as possibly so the market can liquidate itself and restore a balanced ratio of supply to demand.
Valid points, and I also acknowledged that my post was very simplistic and that the scenarios represented opposite ends of a spectrum. What I was trying to point out is that the statement on Obama's site is rather vague. I guess we'll just have to sit back and see what really happens. At this point, I think many ideas are either already on the table, or people are working on ideas to put on the table. While analyses are good for keeping people open minded and looking at both sides, I do hate to see people crying "fire" before there's even any smoke. People have pointed out that things that once appeared on Obama's site have been reworded or eliminated, so I'm thinking this portion of the Obama-Biden plan is not yet cast in stone.