Here are some recent interesting posts from the MoneyBlogNetwork and beyond: Five Cent Nickel buys a new vacuum. Blueprint for Financial Prosperity talks about the wash rule. No Credit Needed is saving a ton of money. Get Rich Slowly gives

Anytime the government interferes in the free markets, unintended consequences happen. In this case, it may actually hurt the real estate market, not help it. The politicians think this will preserve home values and stabilize the market. It may help preserve home values, but it will probably slow the number of sales in homes. If these subprime borrowers lost their homes, it would drop the home values, which would bring new, deserving buyers to the table. Real estate might get more movement and actually normalize. Now the real estate market may sit and languish for longer than it would under a market driven correction.

Also, this may harm the rental market in unintended ways. And, of course, it will hurt the investors who purchased these loans through Collateralized Debt Obligations (CDO). These investors are not just rich fat cats. Many pension funds hold these loans so it affects the retired teacher, police officer and firefighter. The State of Florida is already having trouble paying its teachers because it invested in many of these loans. The value of these loans will certainly drop further since the risk/return ratio is much worse than a Treasury bond. Plus, who wants to buy something where the government might step in and extend the “teaser freezer” another five years; thus, guaranteeing lower yields than most Treasuries or high grade corporates.

Finally, the government is hurting the borrowers as well. Sure, it is painful to lose your house, but mistakes are life’s greatest lesson. These folks probably won’t change their behavior because the government has created a moral hazard. These folks will believe the government will bail them out if they are in financial distress. This is not how America became great.

The people who took out these mortgages were cheaters – cheating the 20% down, fixed-rate rule that had been in place for decades. Because of them, home prices rose to ridiculous levels, making homes unaffordable to all but the best earners. I don’t see how this is good for the country. Now anyone who wants to buy a house will be paying till they’re 90.

So as I sit in my small house with my above-average salary, waiting for prices to drop so I can buy a house half as nice as the one my parents could afford on my same salary, am I supposed to be happy that the government is going to let these same cheaters stay in the houses they never should have afforded in the first place, keeping prices still too high for play-by-the-rules guys like me?

The even scarier part is that Dems would have done ever worse had they been in power. Hillary wants to freeze all ARMs and put an end to foreclosures. Might as well rename the county the USSR United States Socialist Republics.

It is simply disgusting.

And yet, I know that a lot of what drives the economy is perception. Money is this fluid that flows around from person to person, but it is not wealth. It is only wealth to the point that it can purchase the things we desire. So having more money in the system (inflation) shouldn’t really change anything since we all would just adjust to the new amount.

And yet, when the economy flags, the Fed lowers interest rates and new money is created. And for some inexplicable reason, this seems to help smooth things out. We generally consider this a good thing; we get recessions instead of depressions.

Perhaps a bailout only prolongs the pain. But I might be persuaded that that’s a good thing, just like recessions are better than depressions. Perhaps it might be better to have housing be a laggard for a decade than to have people starving for 6 months. For sure there will be people who can’t afford basic necessities in either scenario.

But I wonder just how much any of this is going to do. Interest rates were still pretty low as near back as February. My sister-in-law took an ARM last summer at a decent rate. I think she’s nuts of course, but a “friend” at the bank sold it to them. Does anyone really think that whatever bailout has been suggested is still going to be in place 5 years from now when her loan resets? I doubt it.

No matter what happens, I expect there will be plenty of pain to go around.

I’m not blaming the Democrats.

But is it fair to blame this on Democrats??? Come on! If Bush can take a moral stand on 1) cutting taxes while increasing spending, 2) fighting three wars (one optional) on credit from China, 3) talking about privatizing social security…

… then surely he can find the moral backbone to stand up and say this is a cut-n-dry dumb idea!

Second, I agree with you JLP, but PLEASE don’t stop writing about subprime topics. You are my primary source as to what’s worth reading more about and what’s not!

What’s worse? Wouldn’t freezing those rates drive up rates for prime borrowers so banks can recoup profit? Or would they go higher if they all foreclosed and banks hiked rates to keep themselves above water?