At The Corner on National Review Online, Stephen Spruiell makes one heck of a point that deserves much discussion among House Republicans and their alternative plan.
* Rather than providing taxpayer funded purchases of frozen mortgage assets, we should adopt a mortgage insurance approach to solve the problem.
* Currently the federal government insures approximately half of all mortgage backed securities. (MBS) We can insure the rest of current outstanding MBS; however, rather than taxpayers funding insurance, the holders of these assets should pay for it. Treasury Department can design a system to charge premiums to the holders of MBS to fully finance this insurance.
Immediately, this strikes me as the kind of program that has the potential to become a permanent feature of the policy landscape as opposed to a temporary measure. These kinds of government insurance plans can be very hard to kill. Whatever its drawbacks, the Paulson plan — buy, hold, liquidate — would be easier to terminate.
The shelf-life of any government involvement is key to my view of any such assistance plan or program. In fact, I will be willing to “pay more” or endure more short term pain (presuming it is one that actually addresses the crisis constructively) if I know it (the program and government direction in our free market) has a shelf life and will be terminated – in other words, a course and an end point.