George Will

WASHINGTON -- She who would be president excoriates, as Democratic presidential candidates must, the current president and almost all his works. But she and he largely agree regarding the subprime mortgage problem. Granted, she greeted his response to it with the cri de coeur without which Democrats would be speechless: "More!" She upped his ante by proposing a moratorium, for 90 days, on foreclosures. But the crux of her proposal is the crux of his -- a selective five-year freeze on the rates of subprime adjustable-rate mortgages.

Hillary Clinton already is intimating that a seven-year freeze might be needed. Let the auction begin. Any freeze makes it likely that lenders will henceforth add risk premiums to the cost of money for less-than-prime borrowers.

Although the freeze of adjustable mortgage rates amounts to a revision of perhaps hundreds of thousands of contracts, it will help a relatively small number of people. And it will not help scrupulous borrowers who have scrimped and sacrificed to fulfill the obligations of their contracts. According to Treasury Secretary Hank Paulson, 93 percent of American mortgages are paid on time. At most, 15 percent of recent "resets" -- mortgage rate increases -- have resulted in foreclosures. Alan Reynolds of the Cato Institute says that only about a third of adjustable-rate mortgages are with subprime borrowers and barely half of subprime mortgages have variable rates.

Clinton perhaps regrets that the plan the president has enabled and endorsed is voluntary. Today's liberalism, combining tolerance and statism, cares less what happens than that it be mandatory. But the plan is not entirely voluntary: Many people who own mortgage-backed securities might lose less because of the plan, but they did not participate in formulating it.

In helping lenders to cooperate with each other in reducing their distress and that of their customers, the government has played only "a convening role," says Paulson, who adds: "This is a private-sector effort, involving no government money." But the second half of that statement does not validate the first. The government is now implicated in the making of arbitrary distinctions.


George Will

George F. Will is a 1976 Pulitzer Prize winner whose columns are syndicated in more than 400 magazines and newspapers worldwide.
 
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