Do-Over.

Because one mortgage-related bubble per decade is clearly not enough, why not create another one?

That seems to be the thinking behind the recent proposal to guarantee low 4.5% rates on all new mortgages.

The strange logic of encouraging the creation of another asset bubble aside, where does the government get the dough?  The taxpayer (or actually China).  And here's the real kicker: as WaPo explains, the government could actually make a buck or two:

"One possibility is for the Treasury to raise money by issuing bonds to the public at 3 percent interest. This could allow the government to turn a profit because it would be buying securities that pay 4.5 percent."

OMG, brilliant.  Finance for dummies:  borrow at 3%, lend at 4.5%, earn 1.5%.  Love it!

Except, wait a minute!  Why not borrow at 3%, lend at 28%, earn 25% - and buy everyone a home, no mortgage mess necessary?  Because anyone with half a brain knows that leanding at 28% (to Argentina, in case you were wondering where you can earn that kind of rate)  has enormous risks associated with it, so the math doesn't exactly work that way.  

I'm not saying I know what to do with this mess, but this sort of misleading pseudo finance isn't doing anyone any good.  That WaPo doesn't quite get it is not terribly shocking; I just hope that the folks at the Treasury do.