"about the only people who benefit from this new Treasury proposal are the homebuilders, who have been lobbying for a bailout."

Roubini and I basically agree on this ( I'm sure he was waiting to hear my view ) as well, but I want to talk it out. Via Clusterstock:

"From TechTicker: A new Treasury plan to lower mortgage rates won't solve the housing crisis and is a "essentially a direct bailout of the homebuilders," says Nouriel Roubini, economics professor at NYU Stern School and chairman of RGE Monitor.

Homebuilding stocks like Toll and Lennar surged early Thursday, a sign Roubini is not alone in sharing this view.

Using Fannie, Freddie and other GSEs, Treasury will "encourage banks to issue new mortgages at lower rates by offering to purchase securities underpinning the loans at a price equivalent to the 4.5% rate," according to the Wall Street Journal."

I'm not sure why he finds this so troubling. I'm not for it, but let's read on:

"The plan will be effective in lowering rates but interest rates aren't the key to resolving the housing crisis, Roubini says: "Prices went through the roof" and need to fall another 15% before housing bottoms and homes become affordable to the majority of Americans. (The new Treasury plan does nothing for Americans looking to refi but last week's Fed announcement was aimed, in part, to help existing homeowners and refi activity surged in reaction.)"

I don't disagree, but if people can buy houses at this price and afford them, then that's the price. Obviously, if interest rates are lower, then housing prices can be higher. But is that a law? When I bought my house, I got it for 10% less after bargaining.

"Furthermore, there's not enough Americans who are credit worthy and confident enough in the economy and/or their job security to absorb the record levels of unsold homes on the market, says the notoriously bearish economist. "For new programs you have to qualify. Very few people qualify," Roubini said. "If you are loosening the criteria then you are creating a credit risk for the government because you're creating mortgages people cannot afford and some of them are going to default. You create another fiscal problem down the line."

Well, loosening the criteria would truly be insane. If that's what will happen because of this plan, then it's a disaster in the making. However, I don't believe that. In fact, I don't think that this program is worth the money. It simply won't do what it's supposed to, precisely because there aren't a large number of people who are going to qualify, and those people who do would be better off waiting for housing prices to decline, unless you believe that mortgage rates are going to immediately shoot up.

"That being the case, about the only people who benefit from this new Treasury proposal are the homebuilders, who have been lobbying for a bailout. Unfortunately for the rest of us, it looks like their efforts have paid off."

Now I see what he's worried about, and I agree. Bailing out homebuilders is not enough of a reason for this plan. I understand the political pressure to do something about housing, but this is not, in my opinion, the way to deal with this problem.