Replies

Paulson offered a general outline of the plan on Monday. He identified four groups of subprime borrowers facing rate increases on their adjustable-rate loans: Those who cannot afford their payments even at the current rate; those who could afford payments at the higher rate; those can refinance into a "sustainable mortgage while keeping investors whole;" and those who can afford their mortgages today but could not at the higher rate.

Only the fourth group would get help.

So then how is this "giving the junkie more dope?"

This is a situation where people who are a bit overstretched when you consider the rate increase, but are paying the pre-adjusted payment just fine, are being given enough time for the market to quiet down to refinance the loans. These are people who WANT to pay their bills, they're not "deadbeats" or "freeloaders."

You're not propping up deadbeats who can't pay on time even now, nor are you helping those who don't need the help. Granted, one could make the argument that it's unfair to those who are paying the increased rates and can afford to do so, but I suppose nothing's perfect.

Face it...if this were left until a potential Democrat administration (which I'm still optimistic we won't have to worry about, but let's say we do) it would be a LOT worse, Hillary would straight-up GIVE taxpayer money to these borrowers. This is the best "solution" we can hope for - it addresses the political and economic need to do "something" and costs the taxpayers essentially nothing...it preserves the values of the homes of people who are innocent in the whole thing by preventing a huge rash of foreclosures, and keeps the banks from taking as big a loss.

Granted, one could make the argument that it's unfair to those who are paying the increased rates and can afford to do so, but I suppose nothing's perfect.

Sounds a lot like: "From each according to his ability, to each according to his need."

By the way, how do you gauge whether somebody can really afford the higher payment? Won't it be in their best interest to spend every last penny they make, so that it "looks" like they have nothing left over?

I agree. The rats have proposed a much more sweeping solution. I would prefer that the housing market left alone. We have had past housing slumps without bailouts. If you lived in Colorado, Texas, or Oklahoma in the mid 1980s, you will remember the large number of foreclosures. Housing prices were driven way down (50% or more loss of value).

This policy will drive up the cost of credit. There is now a substantial political risk for lending to marginal borrowers.