Mortgage investors mostly agree that the government’s plan to reverse the housing slump is doing more harm than good. The government’s actions will increase borrowing costs because creditors would demand higher returns. Capital is going to cost more. Economist and SFI external professor John Geanakoplos has stated that “Obama’s plan will mostly be ineffective in cutting losses because it focuses on lowering payments rather than reducing homeowner debt.” Geanakoplos has advocated breaking contracts by putting the power to modify loan terms into the hands of independent arbiters.

More SFI News