Today's Political News: December 5th, 2008

The Short And Not-At-All Sweet Edition:

1) Jobs fell by half a million+ in November. Unemployment is officially at 6.7%, a 15-year high. Remember that unemployment doesn't consider people that have stopped looking and stopped filing for unemployment benefits. Robert Reich thinks we're closer to 11% of the population needing work.

2) Washington's latest new new plan is to help out new home buyers by dropping the mortgage rate to 4.5% from 6%. But that would only be for new home purchasers and not re-financers. It represents the first rumblings of direct assistance to ordinary citizens and addresses one of the root causes of the crisis.

However what confuses me is how this actually helps anything when you don't extend it to re-financers. If you incentivize new home purchases, but don't concommitantly do anything to help current homeowners, you're going to get some unintended consequences. If I own a home, and I can't refinance to 4.5%, but I can buy a new home at 4.5%, what's to stop me from putting my house on the market in order to trade in my 6% for a 4.5%. This effectively incentivizes SELLING houses to 50 million people that already own a home. Not exactly the outcome I think Treasury is after. But then maybe I've got it all wrong somewhere.

The other thing this does, now that it's leaked, is effectively freeze new home sales until this plan is officially announced. Why would I go out and buy a house at a 6% rate if I could wait a month and get a 4.5% rate.

Late Update:

I just found this good post over at Calculated Risk, which is usually too wonky for me, but has a write up on the new new plan and how it more than likely would be ineffective.