[quote=briansd1][quote=flu]This must suck donkey butt for folks who were responsible savers trying to save up for a home all these years. It would be ironic if these low interests rates were available only to people upside down.[/quote]

Don’t be bitter. Bitterness causes ulcers and activate enzymes that can cause cancer.

But seriously, monetary policy (low interest rates) is trickle down economics. The liquidity benefits mostly the banks, corporations and well-to-do individuals who need it least.

We need other policies to increase cash flow for those who are suffering most.

As sdr said, reducing mortgage interest rates at the bottom end will unleash billions of dollars to help the economy.

If a homeowners had been faithfully paying his mortgage at 7% (can’t refinance for some reason). Why not reduce the rate to 4%?

The banks and corporations got their bailouts… now,let’s help the people who need it most. It’s about helping the economy as a whole, right now.[/quote]

Those billions of dollars were already unleashed since so many people haven’t been paying ANYTHING on their mortgages; some haven’t been paying for years.

I’m just trying to figure out what they are going to do to the current bondholders who have non-callable bonds. Are they going to demand these bondholders take a haircut, even though these bonds are guaranteed to pay a certain rate? How will the compensate these bondholders for the losses they are going to take on the (as yet, unrealized) cap gains?

If they do this, do they have any idea what it will do to private demand for govt-backed or GSE bonds?

IMHO, as a bondholder, I would view this is a type of default.