AussieMac? No Thanks

Alan Wood on the Gans-Joye proposal to harness government guarantees to under-write mortgage lending:

The creation of a government - that is, taxpayer - subsidised institution, largely for the benefit of non-bank mortgage lenders, would need to be justified either by the existence of a long-term structural problem in the provision of housing finance in Australia, or evidence of a short-term collapse in the availability of home loans.

Neither problem is evident, and in any case it would take too long to set up such a body for it to be of any use in the current credit crisis. Nor is it warranted as a hedge against future crises.

Interestingly, in his upbeat press release, Greg Medcalf was obliged to include the following sentence: “While the proposal has received encouraging feedback, Mr Medcalf said there was some concern the enhancements were addressing a short-term market issue that did not require a long-term fix”. Just so.

posted on 03 May 2008 by skirchner in Economics, Financial Markets

(0) Comments | Permalink | Main