I scoured the internet looking for news of major head trauma and came up empty-handed so I’m at a loss to explain how he could support anything as stupid as this:
The excesses of the bubble years have created a legal morass, in which property rights are ill defined because nobody has proper documentation. And where no clear property rights exist, it’s the government’s job to create them.
That won’t be easy, but there are good ideas out there. For example, the Center for American Progress has proposed giving mortgage counselors and other public entities the power to modify troubled loans directly, with their judgment standing unless appealed by the mortgage servicer. This would do a lot to clarify matters and help extract us from the morass.
The added emphasis is mine. Yes, Paul Krugman thinks it’s a good idea to give disinterested third parties the ability to modify troubled loans.
I don’t think it takes a fancy-pants degree in Economics to see that banks are going to be very reluctant to make home loans if they can’t be sure that a mortgage counselor won’t modify the contract terms somewhere down the road. This sounds like an excellent plan if your goal is to discourage lenders from making home loans and driving up interest rates but maybe not so good if you’d like to encourages home ownership.