Bailouts

An Idea On Negative Equity From Harvard

Posted on Monday, August 17, 2009

For any home owner with a loan-to-value ratio greater than 120 percent, Martin Harvard Prof Feldstein would offer a reduction in principal, the cost of which would be shared between the government and the lender down to the 120 percent level. In exchange, the borrower would accept a recourse loan that could not be discharged by bankruptcy.

He argues that this plan would stabilize the housing market and cap housing prices at the current level.


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