It's Mortgage Bailout Time-too little too late!

The Bush Administration is making the Noises That Go Before The Big Announcement. The Bush Banking guys are busily hammering out and agreement with the mortgage industry, that will be announced this week by Treasury Secretary Paulson (if all goes well). In general outlines, the agreement seems to be a massive "do-over" of the entire adjustable rate mortgage concept. It appears that the magic wands of the Federal Government and the bankers will be waved, and the ARMS will all be changed into fixed rate mortgages. End result? Homeowners get to avoid foreclosure, and some overeager investors are left holding paper with a decreased value. This fix, however, is supposedly temporary- just for a two to five year period so that the banking industry can regain its footing (and so that GWB can start his permanent golfing vacation in the absence of a full blown recession). Dana Perino blandly declared "The President has been clear that no taxpayer money has been used for any sort of bailout". Okay!

As Wall Street knows, uncertainty is always bad. This move will remove that uncertainty that has tormented the world economy in recent weeks. It is pretty clear to me that Ben Bernanke went to Paulson and said hey, this thing of telling people not to worry about the mortgage mess is not working, things are absolutely falling apart here. But questions are still on my mind: why were ARMs a good idea in the first place, if the only solution was to declare them nonexistent as soon as we decided not to like them? And is this really a temporary measure, or is it going to end up being permanent since it is a desperation move in the absence of any other workable plan?

The real question here: is it maybe too little too late? This effort is obviously precipitated by the clock running out on two things: the 2008 election and the collapse of our economy under the foreclosures that will be arrivng in 2008. The jury is very much still out on the question of how well a rate freeze will stop the bleeding. There are hundreds of thousands of people out there who have already gone below water level, and stopping the upward march of their mortgage rate will not help them.