Republican economist re. McConnell's mortgage plan: "Republicans have lost their mind on this."

[BeyondGeography]

And from Fox News no less:

McConnell Proposes Cheap, Government-Backed Mortgages to Stimulate Economy

Senate Republican leader Mitch McConnell on Monday demanded an amendment to the mammoth economic stimulus package to give government-backed, low-interest loans to homeowners -- a revision that he says will both increase the demand for houses and boost the average household income. "We believe that a stimulus bill must fix the main problem first and that's housing," McConnell told reporters Monday in introducing a plan to offer fixed mortgages of 4 percent to "any credit-worthy borrower."

..."McConnell's 4 percent proposal would allow for several trillions of dollars of mortgages to be refinanced and that would overwhelm the mortgage system," said Bert Ely, President of Ely and Company, a financial institutions and monetary policy consulting firm.

"It might sound good, conceptually, but it's simply not feasible and would have a lot of unintended consequences," he said.

..."It's a terrible idea," added John Tamney, a senior economist at H.C. Waintright Economics in Washington.

"I've always voted Republican, but Republicans have lost their mind on this. It would put more money into the debt economy. The more money that goes there, the less money there is for the entrepreneurial economy," Tamney said...

http://www.foxnews.com/politics/2009/02/02/republicans-stimulus-address-housing-crisis/

[Skidmore]

1. Dems and their spokes people need to be hitting the airwaves

and insist on being seen and heard in the media. Like NOW!

[renate]

2. I wonder what would happen if 30-year mortgages were converted to 40-year ones

McConnell's idea does sound good on the surface, since something like one in ten mortgages are in foreclosure--that kind of glut of homes can't be good for the market, either. But I can see the problems with it, too.

Couldn't payments be lowered by letting people (at least those with the money to stay in their homes) repay their mortgages more slowly, with (this would be important) no prepayment penalty once they have enough money to catch back up?

[karynnj]

3. Interesting - I bet this is offered, because they know it won't be accepted

This means they can say this is what we would do - and most mortgage holders could see they would have benefited. Yet they are not hit with the responsibility of actually doing it.