The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations.Changing the rules before the game starts (or contracts are signed) is fine. Changing the way points are scored, penalties are assessed, or reneging contracts just increases uncertainty and decreases liquidity, as people cannot measure risks and rewards with all the shifting sands under them.
Let the markets clear, the holders of toxic paper to mark it properly, the denial to play out, the market to touch bottom, so more certain pricing can return to the market.
UPDATE: John Carney seems to be saying something similar.
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