Dean Baker supports what I was sensing which was that the Fannie/Freddie infusion won't do much good, because there won't be a great pool of applicants to be added unless the rate goes way down, which I am against:

"The NYT reported that Barney Frank, the chair of the House Financial Services Committee, complained about the conduct of the bank bailout that “the anecdotal evidence is still overwhelming that there are people who think they are good borrowers who can’t get loans.”

It would have been appropriate to note that the data appears to contradict Mr. Frank's anecdotal evidence. There has been no surge in the number of mortgages applications over last few months. (They did jump last week in response to lower interest rates.) If people felt that they were creditworthy, but were being turned down anyhow, then they should be a sharp rise in the number of mortgage applications relative to house sales. Since this has not taken place, it seems that Mr. Frank is wrong in his assertion.

The NYT could have better informed its readers by calling attention to this fact.

--Dean Baker

I just don't see any evidence that there will be that many additional buyers. Free Exchange made the argument that it might unfreeze these markets, but Baker's evidence puts this in doubt. Of course, nothing is written, so it could turn out that a small drop in the interest rate on mortgages will have a major impact. I was simply saying that a further 5 % drop in housing prices might be a better deal and have similar consequences if rates remained the same or went slightly lower. I'm also not sure how much of this infusion will be spent. If you want to encourage refinances of mortgages, then it does seem that you will need a decent drop in the rate given the recent history of mortgage rates.

I feel that Baker's post supports my position.