I took a double take today after reading HousingWire’s article about Treasury Secretary Paulson’s rejection of the rumor that the US Treasury was interested creating a 4.5% interest rate for mortgages issued by Fannie Mae to stimulate the housing market.

Paulson said:

>”We didn’t float any plan,” Paulson said. “I am always looking at new ideas and I have said from day one that the key thing to get us through this period is getting housing prices down.”

Mission accomplished: – housing prices are down. Perhaps that is why he is leaving in January.

Warning – excessive rhetorical questions ahead

So the US Government is working hard to push housing prices down?
…go against the “American Dream” agenda of the current and prior administrations?
Isn’t it kind of late for that?
And that type of policy will solve the credit crunch?

Ok, I’m back

The financial system enabled now-obviously illogically cheap credit which pushed housing prices higher with little regulatory oversight. We experienced a mortgage bubble – a housing boom was merely the byproduct.

To follow his logic, by going backwards using the recent history timeline, Paulson seem to view falling housing prices as a way to stabilize the financial system – take the pressure off, so to speak.

What he probably meant by his quote: I think he is simply a poor communicator and probably meant that housing price declines have a way to go and he doesn’t want to do anything to artificially “prop” them up.

I agree.

All fixes need to take the long view into consideration.

However, the economy can’t function without credit – it is not the exclusive purview of mortgages.

His poor communication skills ended up stalling transactions as people were waiting for rates to drop further.

>Apparently large numbers of consumers thought precisely that during the week after the disclosure that the Treasury Department was working on plans to slash loan rates for consumers who buy houses in the coming months.

>But in the meantime, the news threw a wrench into the marketplace — making some shoppers reluctant to commit to purchase without guaranteed access to 4.5 percent mortgage money. In some cases, it stalled deals that were ready to go.

Good grief – January 20th can’t get here fast enough. I’ve had it.

Aside: Shoe-ing is the new form of protest (hat tip to Curbed).