Well, they might as well.
It can only be the party of fiscal conservatives that encourages spending on goods that we don’t “need” people to be spending on. They wish to lower mortgage rates to 4 percent! That is because the current mortage rates that are between 5% and 6% are “too high.” Mind you that the current rates are similar to those that prevailed during the late 90s and early part of this decade and that “conservatives” argue helped to fuel the bubble in housing. Mind you that even at 6% (which current rates are well below), mortgage rates are well below their historical averages.
But why would a politician care to understand a little economic history? Why? Because if they did, they would begin to understand that this is an abominably bad ideal. Kids, do we remember the S&L Crisis? Well, the laymen’s version of what happened there was that thrift institutions held huge mortgage portfolios (long-term) at very low interest rates; but their source of funds were far more costsly due to the inflation of the 1970s and monetary tightening of the early 1980s. So, borrow short term at high rates, and lock in to long-term contracts generating very low rates. Sounds like a recipe for disaster. The taxpayers “only” were on the hook for bailing out the FSLIC to the tune of $150 billion at that time.
Why would these fools propose such a measure? Aside from their obvious thinking that the housing market needs “propping up” (it does not – falling house prices benefit as many people – potential buyers and landlords – as they hurt, only problem is that stupid financial institutions have worthless assets that depend on house prices increasing. Imagine Bowie Bonds – these are assets institutions hold that pay interest when people buy David Bowie records. If suddenly world music tastes change and no one likes classic 1970s rock, is it a good policy to subsidize the purchase of Bowie records around the world? Then why is it good policy to subsidize the purchase of “Bowie Houses”?), the reasons must comprise the following:
Seriously, we “need” 4% mortgage rates as much as obese individuals need cheaper food to help prevent their weight-loss.