“A Bureaucratic and Administrative Nightmare”
Conn Carroll /
7th Circuit U.S. Court of Appeals judge Richard Posner and Nobel Laureate Gary Becker weigh in on President Barack Obama’s mortgage bailout plan on their Becker-Posner blog. First up, Posner:
The four measures, taken as a whole, are likely to be administratively complicated, costly, and slow, and so have very limited effect in arresting (let alone reversing) the decline of housing prices by reducing the glut of houses for sale as a result of widespread foreclosures. [Cram down in bankruptcy] fails on both grounds; bankruptcy is a complicated proceeding and having to declare bankruptcy, especially under Chapter 13, which does not wipe out all one’s debts, will be an unattractive option for even mortgagors otherwise inclined to abandon their house. [Liquidation of mortgage-backed securities] involves the vexing problem of valuing mortgage-backed securities in order to decide what to pay for them. [Loan Refinance] and [Loan Modification] are administratively very complex because they involve (as does [cram down] for that matter) separate negotiations or proceedings for each mortgage.