Mr. Baker thinks that lower interest rates will be of use in stimulating the economy. I'm not so sure such stimulation will be more than slight. While lowering interest rates during the recessions since Bretton-Woods was dismantled helped bring the nation out of a downturn, those recessions were caused, at least in good part, by an increase in Fed rates. This one was not.

I'm afraid the only "cure" is for government to do nothing aside from allowing bankruptcy courts to mitigate payments for primary domicile owners. Some flippers, multiple-homes owners, raw speculators, financial institutions, and mortgage insurers are going to have to be allowed to go under. A house of cards is not something one should protect. Let it fall and start over. First, any institution with access to the discount window must be regulated (Sorry, Phil Gramm), second, grant credit amnesty for borrowers who went bankrupt during this anomalous period, third, anyone whose company lent money against future appreciation should be stripped of assets and placed in prison.

I don't think that's what he's saying - he's saying that the correct thing to be doing right now is to TRY to stimulate the economy. Doing the opposite - raising rates to raise the value of the dollar - is not useful for the goal of economic stimulation (and, as DB likes to point out, is not good for working class types more generally). So, yes, it might not work, but at the very least you should give it a shot, and not run pell-mell in the other direction in order to help out some rich folks.

anyone whose company lent money against future appreciation should be stripped of assets and placed in prison.

This seems dumb. Are you punishing people for their bad choices? Why not punish homeowners for THEIR bad choices? You want to protect them with amnesty, but send the lenders to jail? Let the borrowers declare bankruptcy - they were bad credit risks to begin with, that's why they shouldn't have gotten the loans; let the lenders swallow their massive losses due to their own incompetence. That seems punishment enough.

Maybe a 6 months moritoriun on foreclosures. Municipalities would like it as it slow down the bleeding TAXBASE. The bundlers would have their worthless paper solvent for 6 more months. And of course the homeowner get a breathing space.

anyone whose company lent money against future appreciation should be stripped of assets and placed in prison.

This seems dumb. Are you punishing people for their bad choices? Why not punish homeowners for THEIR bad choices? You want to protect them with amnesty, but send the lenders to jail?

Actually, lending money against future collateral (i.e., collateral based on appreciating value) is illegal.

And the amnesty I propose is only that credit history not reflect the mortgage defaults which have and will come from what I see as a Ponzi scheme encouraged by the Fed, ownership-society George, the Comptroller of Currency, and unregulated financial institutions created by Gramm-Leach-Bliley. Homeowners will be punished plenty by either loss of equity and a home or ameliorated mortgages on properties which will likely not regain their purchase price for many years, if ever.

Actually, lending money against future collateral (i.e., collateral based on appreciating value) is illegal.

My familiarity with lending law is pretty low - but I don't see how this makes any sense. Unsecured loans are perfectly legal, so why wouldn't lending against hypothetical collateral be? Or are you suggesting that MBSs, etc., are illegal?