November 26, 2012

Regarding the Nov. 23 front-page article “Why has the U.S. economy sputtered?”:

The arguments in favor of bailing out underwater homeowners were unconvincing. Contrary to the assertion by former White House Council of Economic Advisers chair Christina D. Romer, underwater mortgages are not necessarily “troubled”; most are being paid on time.

The fact that borrowers with “huge mortgage debt” cut back dramatically on purchases of consumer goods may well indicate that those who bought houses they could not afford also bought consumer goods they could not afford. Lamenting this loss of purchasing power is misguided; prior to the crash, economists generally warned of the danger of such high consumer indebtedness.

Finally, there are better ways to stimulate the economy and enable underwater borrowers to gain access to lower mortgage rates than the draconian measure of using taxpayer money to pay down their debt, which would leave a lasting bitter taste in the mouths of those who had to pay the bill.

Victor Cholewicki, Washington