Romney's Fed Chairman to propose massive refinancing of underwater mortgages

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Posted by Dylan Matthews on August 28, 2012 at 10:59 am

In an interview with Bloomberg last night, Mitt Romney reiterated that he wouldn’t reappoint Ben Bernanke as Fed chairman, and strongly hinted that he would choose one of his two top economic aides, Harvard’s Greg Mankiw or Columbia’s Glenn Hubbard, instead. Fox Business reports that Hubbard is the front-runner for the post, but notes that Stanford’s John Taylor, a Romney adviser and senior treasury official under Bush, is also in the running.

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Hubbard ... just the other day said Bernanke should be strongly considered for reappointment, calling him a “model technocrat”.

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So what does Hubbard think about monetary policy? On the one hand, he, like many Republicans, has been cool toward Bernanke’s efforts to drive down interest rates by purchasing bonds — the so-called “quantitative easing.”

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Hubbard and his Columbia colleague Chris Mayer have proposed a massive refinancing of mortgages under the purview of the Federal Housing Administration, Fannie Mae or Freddie Mac. They estimate that the plan could save 30 million homeowners an average of $2,000-3,000.

Hubbard wanted to implement this policy through federal regulatory agencies, but as Joseph Gagnon, a fellow at the Peterson Institute who managed the first round of quantitative easing at the Fed, tells me, the policy is easily implementable through Fed policy as well. The Fed, for instance, could buy up underwater mortgages and refinance them under lower rates.

http://www.washingtonpost.com/blogs/ezra-klein/wp/2012/08/28/the-three-frontrunners-for-fed-chairman-in-a-romney-administration/