The proposal to allow judges to rewrite mortgage contracts through a process appropriately known as “cramming” is the one of the most economically ignorant proposals from our still very new administration that is building an ever growing inventory of bad ideas.

If a judge can simply decree a change of the amount owed in a contract, the supply of private capital to the mortgage market will either a) disappear or b) the interest rate will escalate sharply to cover the potential of legal theft handed to some unknown judge.

The end result of the evaporation of mortgage capital is to keep housing prices depressed forever at a time when the president is trying to keep people in houses that have dropped sharply in collateral value.

A better idea would be to give a tax credit to a bank for a portion of the write down that they voluntarily negotiate with the lender under the condition that the bank keep the loan on their books for a predetermined period of time.

A reduction of mortgage interest deductions is probably a fair idea; why should the wealthiest be able to deduct an unlimited amount of mortgage interest? Yet while I general support the idea of a mortgage deduction cap, I could not envision a worse time to impose this change; when the real estate market is in the gutter.

Since the Republicans are effectively neutered, our only hope is for the Blue Dog Democrats to restore some sanity to these ridiculous proposals.

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