Jawboning

From the esteemed Wall Street Journal, we have: Paulson Shifts on Mortgages.

U.S. Treasury Secretary Henry Paulson, concerned that millions of homeowners aren't being helped quickly enough, is pressing the mortgage-service industry to help broad swaths of borrowers qualify for better loans instead of dealing with mortgage problems on a case-by-case basis.

In an interview, Mr. Paulson said the number of potential home-loan defaults "will be significantly bigger" in 2008 than in 2007. He said he is "aggressively encouraging" the mortgage-service industry -- which collects loan payments from borrowers -- to develop criteria that would enable large groups of borrowers who might default on their payments to qualify for loans with better terms.

Let us first take a detour:

We first had this from CNN on April 20th.

"All the signs I look at" show "the housing market is at or near the bottom," Paulson said. The U.S. economy is "very healthy" and "robust," he said.

Then, we had this on July 2nd.

"In terms of looking at housing, most of us believe that it's at or near the bottom," he told Reuters in an interview.

Mr. Paulson, you seem to be coming around to Planet Reality(TM). You know the one that Warren Buffett lives on?

Also, "aggressively encouraging" is not a plan. Agreed?

Flapping your gums doesn't seem to be having much of an effect as you may have noticed. Of course, you and I both know that that was never the plan but perception matters particularly at the level at which you are operating. Agreed?

You may want to consult this graph again. Time's kinda running out.

There's just one teensy-weensy niggling little problem with the "broad swaths" solution. The vast majority people wouldn't be able to pay back the principal even if you gave them loans at 0% interest. So I would advise a Plan B.

And if they hand back the house, then their paying neighbors might also refuse to pay inordinate sums, and may also hand back the house. In that case, I would advise a Plan C as well.

Incidentally, how's that Super-SIV plan of yours working out?