Subprime followup

My buddy Dom has a great followup to my earlier post on Senator Clinton's subprime solution.

I believe both lender and borrower are to blame—it was a bubble, after all—but the lending institutions definitely bear a huge burden of responsibility. While borrowers clearly overreached—prices will just keep going up!—mortgage writers have a duty to serve their client. And many lenders certainly danced around the law—encouraging falsified mortgage applications or outright lying about the terms of a loan. Moreover, this discussion does not even begin to get into the mess in the secondary and securitization market, which was the start of the broader macro-crunch and continued source of contagion.

Regardless of where you place the blame, my point is that the economic fallout from the senator's plan is disastrous: It subsidizes a relative-handful of foreclosing loans at the expense of current (via depressed equity) and future (via higher rates) homeowners. It devastates an industry in the name of saving it and is just bad policy.