Economic Incentives

When Biden said in the debate last night:

Number two, with regard to bankruptcy now, Gwen, what we should be doing now — and Barack Obama and I support it — we should be allowing bankruptcy courts to be able to re-adjust not just the interest rate you’re paying on your mortgage to be able to stay in your home, but be able to adjust the principal that you owe, the principal that you owe.

Did he realize what effect that would have on the mortgage industry’s willingness to grant loans in the first place?

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