Loan Modification

Government Begets More Government

By Implode-Explode Heavy Industries

Actions by which the government arbitrarily alters the terms of contracts create what economic historian Robert Higgs terms "regime uncertainty."... Regime uncertainty discourages private investment and impedes economic recovery because investors must take into account, not only the increased uncertainty due to the recession, but also uncertainty about what the government will do next.

Get ready for permanently higher interest rates, as "regime uncertainty" adds a premium to the vast majority of risk pricing in the economy (except the narrow slivers that the government is directly subsidizing).

Full post as published by Mortgage Lender Implode-o-Meter on June 13, 2009 (boomark / email).