No way, no how, no bailout.
I'm calling my congresswomen and telling them I do not support this bail out. I'm a registered Democrat, but I think this is the rare issue that truly crosses the party line. There are many reasons I oppose the bailout, and I'll hit them one-by-one.
1) It rewards the bad actors who got us into the mess in the first place.
First, the people who bought houses that they knew they could not afford. Second, the lenders who made these bad loans without caring about the likelihood that they could not be repaid. Third, the insurers who bribed the government to not call credit default swaps (CDS's or mortgage insurance) insurance, thus relieving them of the obligation to keep cash on hand in case they had to pay the off the insurance policy.
2) The government will undoubtedly overpay for this debt.
The problem is two-fold right now: these loans are worth somewhere between $0.30 and $0.80 on the dollar, and no one wants to buy them at any price. So now the government will come in and rescue these irresponsible lenders. Guarantee you that the feds pay 50% more than anyone else would be willing to pay for this debt.
3) It doesn't solve the root problem.
Are they going to require oversight of CDS's? Will we start regulation & oversight of the shadow banking system? If not, this problem will just repeat itself in 5 or 10 or 20 years.
4) We're rushing into a solution
Good solutions aren't developed over a weekend or two weeks. Whatever band-aid bail out they come up with will be loaded with unintended consequences and will lead to hundreds of billions in extra spending beyond what anyone anticipates. You can take that to the bank.
5) Scare tactics are being used by the administration to coerce congress into giving the president massive new powers
I'm sorry, but didn't we just leave that party?
6) Once the government owns the debt, borrowers will be much less likely to pay if off.
Think about it-- all these problem borrowers are from the people who overpaid for their houses and borrowed more than they could ever afford. And the government has been going on for over a year about how we can't kick people out of "their" homes and onto the street. Now, all of a sudden these people are going to be stiffing the government & we'll own the houses. Any bets on whether we ever evict ANYBODY? This is a giant signal to the borrowers that they can STOP paying their mortgages immediately, because the government is coming to rescue them. The solution will probably be to write off the debt 100% and give the houses to the current occupants.
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