Monday, November 03, 2008

Generous Homeowner Foreclosure Bailout Programs A "Free Lunch" Spurring Intentional Defaults?

The New York Times reports:
  • [W]ashington and Wall Street are frantically seeking to stabilize markets by curtailing the onslaught of foreclosures. There are now at least four major plans to aid homeowners. But experts say it is difficult to design these programs in ways that reduce the indebtedness of the distressed without giving everyone else a reason to mail the keys back to their lenders. “If the lunch truly is free, the demand for free lunches will be large,” said Paul McCulley, a managing director with the investment firm Pimco.

For more, see Mortgage Plan May Irk Those It Doesn’t Help.