Friday, August 31, 2007

The Baker-Samwick Proposal

Economists Dean Baker and Andrew Samwick have a suggestion for how to deal with the rise in foreclosures:
There is a simple way to allow troubled homeowners to stay in their homes without also bailing out the mortgage issuers and speculators. Congress can pass legislation granting current homeowners the right to stay in their homes as long as they like, simply by paying the fair-market rent. In other words, no one gets tossed out on the street, as long as they can pay the rental value of their house. The fair rent would be determined by an independent appraiser.
Among the policy interventions I have heard floated in the current environment, this is one of the better ones.

Update: For a truly terrible idea, click here. Also, here is Arnold Kling's proposal for a new agency to fix the problem, wonderfully named Bailie Mae.