FreedomWorks

As President Bush prepares to announce a plan to freeze mortgage rates for many homeowners, sixty-one economists from universities and think-tanks from across America, in conjunction with the non-profit advocacy group FreedomWorks, released an open letter to the U.S. Congress advising against "excessive new regulations or federal interventions" to deal with credit repricing in the subprime mortgage market.

The letter warns that:

"Legislation to create new underwriting standards will reduce competition and restrict consumer access to credit. Additionally, efforts to bail out or shore up lending institutions create a moral hazard that would slow the adjustments required in the marketplace…. These [bail out] proposals would fundamentally alter the workings of the mortgage market, leaving consumers with fewer choices when seeking to buy a home and potentially increasing taxpayer exposure for bad loans."

Former U.S. House Majority Leader Dick Armey, a former economics professor who now serves as Chairman of FreedomWorks, commented: "This letter should give policymakers pause in their rush to pass bailout schemes for the real estate market. Most of the policy proposals before Congress would arbitrarily rewrite private contracts, reward speculative lending and borrowing, and expose taxpayers to additional risks. Though it's understandable that legislators might want to respond to homeowner difficulties, the proposed regulations only serve to decrease credit availability for the poor and disadvantaged. Today’s letter adds an important new voice to the debate, that of many of the nation’s professional economists, who are calling on Congress to act responsibly and allow the subprime market to work through the current repricing of mortgage-backed securities."

The letter is part of a broader FreedomWorks campaign against an unwarranted expansion of government involvement in the nation's mortgage capital markets. The full letter, with signatures, can be viewed online at:

View the .pdf of the letter