Subprime bailout:
I doubt there is one person alive that will argue the freeze is a perfect solution. Clearly, it isn't. But, it may be the ONLY solution!
There will be some people who will benefit disproportionately to what they probably should have benefitted - mainly meaning that they will continue to make house payments the same as before (which was a teaser rate). Clearly, that's unfair to someone who did not opt for a teaser rate and may have settled for a higher rate.
But, it's not that simple. Those people who are likely to benefit are overwhelmingly more likely to be people that would have lost their homes in the first place. They still have huge mortgages. They still have monthly payments to make. They probably still have very little equity if not negative equity. They still have potential credit problems. It's not really ALL THAT MUCH of a free ride.
But, the most important thing is that it helps prevent (no guarantees, still a real possibility in 08) a potential meltdown - mostly in the financial world, but potentially also in RE to a degree. THAT affects every single one of us overwhelmingly more than whether a hundred thousand people come out of it smelling better than they have a right to deserve to smell.
The bottom line to me is that the lenders are not really being bailed out. The builders are not really being bailed out. The owners of the loans the lenders sold to are not really being bailed out. And, those speculators who helped create the mess are not really being bailed out either. At least as per Hilary today, this will only affect OWNER OCCUPIED properties (THANK GOD!). So, the moral hazard issue, while ALWAYS relevant, is less of a worry to me than the consequences of doing nothing.
Len
Warren Buffet: 5 minutes and 17 seconds of pure, unadulterated, bulletproof, flawless logic.
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