There’s a resurgence of interest in the proposal originally made by Marty Feldstein. The link to his recent Financial Times piece is here. He wants the Treasury to borrow and on-lend to homeowners, in a way that would improve their cash flow and make it easier for them to avoid defaulting on mortgages. Of course, anyone who participates would reduce their mortgage (a claim on their house) but create a debt to the government (to be collected, if necessary, by the IRS.)
I must say that I find this broadly appealing, in the moment we now find ourselves. I know it doesn’t address mortgages already in default, and there are many questions about how it could be implemented. And I agree that Congress, at this juncture, would need a lot of convincing.
Still, it’s one way to use the Treasury balance sheet to directly reduce likely mortgage defaults. And, if it’s part of a comprehensive approach (including recapitalizing banks), I think this general approach could make sense.
I hope others will post reactions, or links to any variants with plausible details.
The Baseline Scenario 