CEI’s John Berlau in USA Today had the opposing view on the Bush Administration’s plan to bail out some subprime borrowers. John’s article, which pointed out that the plan will harm future borrowers, was also picked up by CSPAN this morning. Here’s what John sees resulting from the plan:
Whatever relief the plan hatched by Treasury Secretary Henry Paulson to freeze the introductory interest rates of adjustable-rate mortgages (ARMs) gives to some borrowers today, it is almost certain to hurt many more borrowers in the future. Instead of going after the real instances of fraud, Paulson set a sweeping standard for a wide swath of borrowers and lenders to back out of consensual agreements. If this precedent of the government arbitrarily pushing through changes to contract terms is allowed to stand, it will make many legitimate businesses think twice about investing in the U.S. credit markets and increase costs for loans.