Another must read post by Yves Smith over at Naked Capitalism. Yves examines the Administration’s offer of $1 billion in zero-interest loans to help homeowners. One choice excerpt from her post:
How is this supposed to help borrowers? Seriously. This is the government equivalent of a subprime teaser loan. But this is even worse. First, teaser borrowers paid at least a smidge of interest (even 2% is more than zero), which placed a teeny constraint on their ability to take on debt. Second, housing was at least appearing to increase, so it wasn’t entirely nuts (merely sorta nuts) to look to the principal value of the house as security and reason to extend yourself financially.
Check out the entire post here.