Listen to Senator Clinton. She has the right idea.
I've proposed a new Home Owners' Loan Corporation (HOLC), to launch a national effort to help homeowners refinance their mortgages. The original HOLC, launched in 1933, bought mortgages from failed banks and modified the terms so families could make affordable payments while keeping their homes. The original HOLC returned a profit to the Treasury and saved one million homes. We can save roughly three times that many today. We should also put in place a temporary moratorium on foreclosures and freeze rate hikes in adjustable-rate mortgages. We've got to stem the tide of failing mortgages and give the markets time to recover.
In discussions I've had with friends and colleagues, we've all come to the same conclusion. Save the taxpayer and you save the banks. If people start paying off their loans instead of defaulting on them, much of this mess can be averted.
Its also an indirect economic stimulus package. Homeowners will spend money in the upkeep of their homes, and also feel more secure in their ability to make larger purchases.
By securing the loans of the homeowner, the taxpayers keep their homes (and keep paying taxes), the banks get their money back if at a reduced rate of interest, and the economy keeps going because people keep shopping.
Its so elegant and obvious there must be something wrong with it. Otherwise they'd have done it already, right?