Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

The First Halfway Decent Housing Stimulus Proposal

Comes from Bill Gross today at the Treasury's GSE conference. Obviously there are still issues such as: what about mortgages not owned by GSE's and how to deal with those mortgages that are underwater but still current? However, at a minimum, it contains a couple of positives that have been missing from current programs and proposals:

1. Reintroduces moral hazard in that it actually incentivizes good behavior (i.e. paying your mortgage) v. current programs which encourage default.

2. It puts money in the pockets of those who have been financially responsible and supports a more productive allocation of capital as those households are more likely to use the additional dollars for saving, investment or smart consumption. Current programs just flush money down the drain supporting irresponsible buying, untenable RE investments, the transfer of money to bank balance sheets and the continued misallocation of capital.

"Gross also urged the government to boost the economy by helping homeowners who are current on their mortgages and whose mortgages are owned by GSE's to refinance at the current low rates.

Gross said such a policy could put $50 billion to $60 billion in the pockets of homeowners, which would boost consumption spending at a time when state governments are cutting back and federal stimulus funding is running out."

http://wallstreet.blogs.fortune.cnn.com/2010/08/17/pimcos-gross-sees-no-government-exit/

Of course, this makes way too much sense and won't help those poor folks who really deserve a 4 bedroom house but were just tricked by the mortgage industry into buying way more house than they could afford then tricked again into using it to lever up even more and by ATV's and boats and TV's,

Make your own call regarding whether it is likely to get any political traction in today's environment.