If you’ve been following my posts on the various bits of legislation to help homeowners, you know that I’m in general agreement with Dean Baker, an economist I highly respect^*, that most of the proposals are more about bailing out banks than homeowners, and that attempts to prop up home prices do little more than make housing less affordable.

However, I also highly respect Nouriel Roubini^†, and he likes the Frank-Dodd Proposal mortgage relief.

Seeing as how I’m not an economist, banker, or realtor, I thought that my readers (both of them) should see his take.

First, he admits that this would be nationalization of bad mortgages to a large degree, but he sees the lenders benefiting, after a 15+% haircut, because they get a guarantee, homeowners get to stay in their house, their neighbors don’t deal with the effects of vacant lender owned housing, and it is far less expensive to the taxpayer than a full bailout.

I still think that real estate needs bankruptcy reform, and allowing mortgages on a primary residence to be adjusted by bankruptcy judges would be the best reform both in the long and the short term.

^*Not only did he call the housing bubble, he actually sold his home on that expectation in 2004, and he’s now renting.
^†Perhaps the strident of the bear economists. The frightening thing is that to the degree he has erred, it has been because he has been too optimistic.