COMMENT In the current economic environment, mortgage legislation should be judged by two criteria. First, it should help the macroeconomy. Second, it should not damage the market that it is intended to assist. As a flawed Democrat-sponsored stimulus package makes its way through US Congress, Republicans have proposed mortgage legislation that fails on both counts. The proposed mortgage relief would have little macroeconomic benefit. Additionally, it would put the government in the role of determining a key price, and it would further entrench the public sector in the mortgage market.
The basic proposal is for the government to set mortgage rates at some number near 4 per cent by offering to buy from private issuers only those mortgages that have the target rate. Since the ability to sell mortgages to the government is so valuable, the proposal is tantamount to the government setting the rate on mortgages.
