Tag: Krugman

I’ve said this before, but Paul Krugman is one of the best newspaper columnists out there.

Maybe it is because he’s not a part of the Washington establishment — he’s an economics professor at Princeton — or perhaps it’s his understanding of the economy and his willingness to contradict what has become mainstream orthodoxy. But he has served during these desultory Bush years as an antidote to the banal and inane that often passes for political analysis, at least on the tube.

That’s why I was pleased to hear that Krugman will be at Barnes & Noble tonight (read Time Off story) to hawk his book, The Conscience of a Liberal.

Krugman, according to the reviews I’ve read (unfortunately, I’ve yet to read the book), calls for a return to the liberal verities — to a government safety net and away from the redistribution of wealth from workers to the rich. He calls for universal health care and for protection of Social Security and he questions the priorities of the current administration.

In his column today, for instance, takes on the Paulsen mortgage relief plan. Henry Paulsen, secretary of the treasury, has proposed a voluntary plan in which some banks might be inclined to offer temporary relief.

Mr. Paulson’s plan — or, to use its official name, the Hope Now Alliance plan — is entirely focused on reducing investor losses. Any minor relief it might provide to troubled borrowers is clearly incidental. And it is does nothing for the victims of predatory lending.

The plan sets voluntary guidelines under which some, but only some, borrowers whose mortgage payments are set to rise may get temporary relief.

This is supposed to help investors, because foreclosing on a house is expensive: there are big legal fees, and the house normally sells for less than the value of the mortgage. “Foreclosure is to no one’s benefit,” said Mr. Paulson in a White House interactive forum. “I’ve heard estimates that mortgage investors lose 40 to 50 percent on their investment if it goes into foreclosure.”

But won’t the borrowers gain, too? Not if the planners can help it. Relief is restricted to borrowers whose mortgage debt is at least 97 percent of the house’s value — which means that in many, perhaps most, cases those who get debt relief will be borrowers who owe more than their house is worth. These people would be nearly as well off in financial terms if they simply walked away.

And what about people with good credit who were misled into bad mortgage deals, who should have been steered to loans with better terms? They get nothing: the Paulson plan specifically excludes borrowers with good credit scores. In fact, the plan actually provides an incentive for some people to miss debt payments, because that would make them look like bad credit risks and eligible for relief.

So the bulk of sub-prime borrowers are left to the market as the investor class gets a bailout. This makes sense only if you view government primarily as a catalyst for business and not as a defender of the citizenry.

So, off to Barnes & Noble I go tonight to hear what Krugman has to say and maybe pick up a signed copy of the book.

South Brunswick Post, The Cranbury Press
The Blog of South Brunswick

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