The huge $300 billion plan stalled in congress is hailed as a great measure that will save those hit by the housing meltdown. His proponents want us to believe that the government is finally doing something for the little guy. This is very far from from the truth.
First, let's look at its origins: the parents are Credit Suisse and Bank of America. The idea to dump risky loans on to the taxpayers was sold to congressional aides by representatives of those who created the mess in the first place. This is another Bear Sterns, except that they have substituted the Federal reserve for HUD/FHA. Why are banks willing to "forgive" 15% of the loans so we, the taxpayers take over the risk instead of doing it themselves and showing those losses in their own books? We will not need this smoke and screens game. Just re-write the loans and keep them if it is such a good idea.
This whole thing flies in the face of those who resisted the temptation to jump into risky loans, and now see those who did get rewarded for making poor choices. What is the lesson here, what type of precedent is set? In the future, all one would have to do is make or take bad loans and wait for the government to come up with a rescue plan.
If congress really wanted to help the people, it should have asked the lenders to fully disclose all those non performing or near that stage and report the actual losses. This would spare us the gimmicks that are wrapped into a so called housing rescue bill. It is in reality a banks rescue bill.
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