Is a bailout "inevitable"?

Good morning, again. Don't let this ruin your Saturday, but the top story on LATimes.com this morning carries the headline "Bailout might be inevitable."

Tom Petruno notes that recent U.S. history indicates it's likely the federal government will try to rescue homeowners: "The idea that a government entity should step in to save some significant number of people who can't make their mortgage payments has been gaining traction, and not just with the think-tank set."

More: "Would this create a massive new bureaucracy? Of course. Could it be a boondoggle for taxpayers? Ditto. Could it foster "moral hazard" -- encouraging bad behavior by other borrowers (and lenders)? You bet.... In any case, history -- and the approach of an election year -- suggest that Washington will come riding to the rescue, and on a greater scale than what the White House has proposed."

Your thoughts? Insights? Comments?
Photo Credit: AP

Comments

[arun]

I'd be all for it (a mortgage bailout) if folks like me, who've been prudent with their expenditure and investment over the years are also included among the population who might benefit from a reduction in rates. For example, if a new federal agency were to effectively reduce mortgage rates on a certain class of borrowers, then I would like a similar benefit extended to me. If someone with an interest only loan with negative amortization can be rescued in order that Wall Street remain standing, then I would like a piece of that pie too. I

f not, I'll vote for anyone who stands against this bailout. I'll even vote libertarian if need be. If it looks like there will only be short straws to draw for people like me, I'll look to emigrate with my family. This country is being run like most businesses these days - no loyalty to its citizen/employees. So I'll treat it in the same way that it treats me - with indifference.

[Keith]

I wouldn't read too much into it, the myths of "Free Gov't Money" usually don't amount to much. I'm sure there will be huge backlash if this really gains any momentum, along the same lines as the illegal immigration issue.

[Jim]

A large-scale bailout won't be there to help Southern California. Why? because the problem is just too big. Anything Washington comes up with will be meant to smooth out the economy for the nation as a whole. On a national level, the housing run-up is probably manageable even without government intervention. The trouble for Southern California is that there just is no way to make a $1,000,000 home affordable to a household making $130K. There's no way to make a $700,000 house affordable to a household making $80,000. That is, not without shelling over an unbelievable amount of cash. That simply won't happen. Contrary to popular belief, Southern California isn't the center of the universe, and congressmen from Kansas and Kentucky aren't about to let their voters pickup the tab for excesses in California and Florida.

[Kaye Thomas]

A bailout won't solve the problem.. . the problem isn't the type of loans or home prices it's the abuse of programs. If lenders know they can do anything and not be held accountable then there is no impetus for better conduct in the future.

[Cal]

Leamer of UCLA says its too late for housing to be bailed out by the Fed and that things went too far too long:

http://www.bloomberg.com/avp/avp.htm?clipSRC=mms://media2.bloomberg.com/cache/vsW_Le0dmT90.asf

30-40% price declines needed for housing "on the Westside of Los Angeles" to bring about a normal market.

[jemarqu]

Nothing gets the readers on this blog more upset then bailouts. Borrowers knew the risk involved if they could not refinance their homes. Any investment is a gamble and there is always risk vs reward.

It's like walking up to the craps table placing a bet, losing and saying "wait, I didn't know the rules of the game".

No matter what now we are going to wind up with some inefficient government program to bailout borrowers. This is going to cost billions in tax dollars and will only help a few. Any bailout solution is like putting a bandaid on a gunshot wound.

[campechano]

The so called "bailout" won't work. For things to become stable again we need a 35-40% readjustment in prices. I am afraid that, by the time this clown we have for president leaves office, the lid they have on Iraq and the financing of the war will explode and we are going to spin into a very scary recession. Pretty soon people are going to start walking away from their homes (read atm's) and simply leaving the keys on the door (as they did in Texas three decades ago).

The last one, please shut off the lights!! (We're having a power shortage over here!) :)

[sheila]

"Contrary to popular belief, Southern California isn't the center of the universe, and congressmen from Kansas and Kentucky aren't about to let their voters pickup the tab for excesses in California and Florida."

last time i checked, California had subsidizing both those states for yyyeeeeeaaarrrsss. it wouldn't be good manners to refuse to return the favor, now would it?

i will take my subsidy in the form of a few bottles of Jack, and a Noah's Ark action figures set, complete with dinosaurs, please.

[Stan]

here is a petition against this:

http://www.petitiononline.com/bailout/petition.html

although i've been told it's not a official petition, if enough tax payers sign and congress gets wind, they will atleast pay attention to what the majority wants