Apparently Ben Barnanke is going to use the stimulus money to buy bad mortgage debt to keep interest rates down and re-inflate the housing market. Clearly this is the mistake we made when we created the first housing bubble and no rational human being could possibly assume this is the best option, but let's say the lenders tighten up credit standards, borrowers take out fixed rate mortgages (as opposed to adjustable rate mortgages) and lenders no longer lend out to sub-prime borrowers. Could this keep the housing market at a somewhat stable growth or will this just the creation of the same housing bubble scenario at only half throttle?
Same scenario. If the lenders tighten up their standards, who the hell are the going to lend to? They'll tighten the standards.. and then legislate the standards away just like last time. Fixed rate vs ARM doesn't matter much at this stage, so many people are already leveraged to the gills to begin with, and there's no point in the government owning a shitload of mortgages, nor anyone else holding an inventory of houses they can't fill. Instead of a simple bubble economy it'll just be a balloon animal economy, with weird restrictions in some places and inflationary booms in others which will keep inflating until the US economy ressembles a neon green demented poodle. Then, it'll pop. Just like last time.