Economist Edward Glaeser critiques the mortgage refinancing plan being bruited about:
A massive refinancing effort is likely to have little impact on the economy or foreclosures or housing prices. What it would do, however, is hurt our government’s already precarious balance sheet by reducing the payments on its vast mortgage portfolio.
Refinancing does little to reduce indebtedness in the near term (although it would reduce the cost of indebtedness in the long term). An effective refinancing plan, however, would constitute a significant subsidy to the top quintile of income earners since they’re they ones who have most of the debt. You pays your money and you takes your choice.
Hat tip: Greg Mankiw.
