So what should we do instead? FDIC Chairperson Sheila Bair has a good idea. She wants to lend money directly to homeowners to keep them in their homes, which might put a floor on the spiraling decline in housing prices which underpins the poor balance sheets of the banks and keeps them from lending. Without putting a stop to the decline in home prices, this recession may not end for a long long time.
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Article comments
1 - Out of credit
In today's WSJ, more about Sheila Bair and directly helping homeowners
2 - Joanne Huspek
Gee what an idea... Give money to the people who need it.
How about a revamp of the mortgage criteria. And start from the top and work your way down. Too many people got loans they should not have. Too many lenders were just as greedy.
3 - Jeremy
Joanne, I think you're right. But even aside from homeowners needing help (some of them may need to leave homes they probably could not have afforded), keeping the housing market from declining too swiftly may be necessary to unfreeze credit markets.
The tricky bit will be how to actually help homeowners (and the US financial system) without severely distorting the markets and costing tax payers huge amounts of money. The FDIC's plan seems good, but small. From the WSJ link posted above "...$40 billion plan would encourage mortgage investors to permit struggling homeowners to refinance by having the government guarantee part of the rewritten loans." The trouble is, $40 billion is such a small amount of money compared to the size of the problem...
4 - Xpressions
We all knew the bailout wasn't going to be enough, even the socialist illuminati. Yet, they still urged it being passed, and now that it has, the economy is not doing any better. Spending more money and saving billionaires and multi-millionaires is not the answer.