Ice Skates on Sale in Hell

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January 15, 2008 8:49 a.m.

Hell has frozen over. I know this because the great conservative icon William F. Buckley has called for a mortgage moratorium. After prattling on for several paragraphs about the beauty of the market, he does a quick double axel and declares that we should have regulated the mortgage lenders and mortgage brokers much earlier. Now, he says, the federal government has no choice but to halt all foreclosures “until the disparity between true value and hypothetical value is pounded away by time and inflation.”

I smell fear.

Bush has advanced two solutions — the mega-SIV and the Teaser Freezer for families with mortgages about to reset. Both are voluntary, and both are failures. In the meantime, the economy continues to slide into recession.

The federal reserve is playing its trump card, intimating another reduction in the interest rate, combined with a discount rate for the banks. But as Allan Sloan at Fortune points out, the Fed has lost its mojo. The banks aren’t borrowing and lending because interest rates are high. The credit markets have frozen up because the banks don’t trust other bank’s books — or maybe they don’t even trust their own. No one knows exactly how much bad debt is out there, and the fear is paralyzing the players.

Buckley demonstrates a new Practical Conservatism: Continue to praise the market, but support a big government intervention that might save the economy before everything has been flushed away.

I’m willing to go with Big Bill on his basic idea. Let’s all admit that consumer credit markets need basic safety regulations in place all the time. Without those regulations, we are ALL put at risk, the reckless and the prudent alike. If this economy melts down, it will take us all, and that means we have a collective interest in sensible credit regulation.

Second, let’s make the banks tell the truth. Right now the banks are asking for special dispensation to avoid telling how many bad loans they are sitting on. The story they are peddling is that it is “too hard” to add it all up. That’s just an invitation to keep the market frozen in fear.

Third, let’s hold off on that mortgage moratorium. Delaying all foreclosures until they can be checked for compliance with the law and offering ways to refinance mortgages might be sensible. But an outright ban on all foreclosures in all circumstances until market prices are back to “true value” seems a bit extreme. I’m glad to see Bill getting in touch with his inner lefty radical, but he is in dangerous territory with this idea.

The first two steps won’t get us out of this mess, but they are good start. Lead on, Bill. I have my ice skates ready.

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