Tyler Cowen links to Brad DeLong who writes,

Arnold Kling’s response is simply not good. It is silly enough to make me think he has not thought the issues through. a 7% delinquency rate on a mortgage portfolio is horrible in normal times, but is actually very good if you are in a depression–ever our Lesser Depression. For an investment with a 15-year duration that’s a cost of less than 50 basis points in a “black swan” near worst case scenario. A portfolio that does that well under such conditions is a solid gold one.

I have a question for Brad. Does he know the fee that Freddie Mac and Fannie Mae charge for mortgage guarantees?

I really do not like to get involved in personal catfights. I think they make both people look bad. But I am not the one whose thinking about what constitutes a high mortgage default rate is silly.