Politicians to the Rescue!

The politicians have ridden to the rescue of the subprime market, weighing in with a plan to freeze interest rates on some loans, etc., etc. etc. This is inevitable and predictable and has happened at the end of every financial mania in history (here is one good example, long but well worth the read). It will do two things: string the problem out even longer, and make it worse. If you were a buyer of mortgage back securities, going forward would you invest in bonds backed by mortgages which the government could change at any minute, according to what it thought was wise? Answer, no. You would be an idiot to do so. The possible fallout is predicted here. If there is no one to buy mortgage backed securities, the issuers will have to offer higher rates to "entice" buyers, which will only send home loan rates even higher, further freezing the market. If Bush's plan goes through, I predict that is exactly what will happen.
Oh...and did I mention we're breezily overriding 200 years of contract law and the sanctity of private property rights in the name of "helping out strapped homeowners." A radical sea change one might compare to Julius Caesar crossing the Rubicon and the end of democracy.