The Bailout Problem

Nicholas von Hoffman writing in The Nation reports:

Price controls are usually thought of as an attempt to prevent prices from going up, but controls can work the other way, too. In the early years of the New Deal, President Franklin Roosevelt tried to drive prices up by various schemes, which did not work. Similar efforts over the last 2,000 years have had a dismal record.

Real estate prices will start rising when people have the income to buy houses again. So far, Paulson has not addressed how individual homeowners are going to make enough money to meet their mortgage obligations. The Secretary's approach is top-down, although the housing market, upon which all depends, is a bottom-up activity.

An article well worth reading.