Here in MA the state government is working on bailing out the people who took out loans they could not afford. Those of us who wanted to buy, but decided we couldn't afford it at current prices. will get to pay for other people's homes.

The problem is that most voters are also home owners (or at least a large percentage are) so if this action can be expressed as propping up home values, they will vote for it because they figure the government will otherwise spend the money on something else.

It's infuriating the way the government punishes virtue and rewards bad judgment.

who should really pay are the ones who gamed the system for their own profit (in other words, all the financial workers who shared in the profits of closing a deal. The people who thought they could take part in what is taught to us as 'the American Dream' in other words, 'owning' a home, are only the most vulnerable ones who in most cases did not have all the information in which to make a truly informed decision.

Just another capitalist Ponzi scheme coming home to roost.

But I don't think that the financial workers who have been able to purchase their own mansions with the tainted cash that they earned will ever have to face any sort of foreclosure.

.."It's infuriating the way the government punishes virtue and rewards bad judgment."

But, isn't virtue its own reward?

Dean, I know that we often disagree but here you have my whole hearted support. I'd much rather believe that there was no one in US politics stupid enough to try and load up Freddie and Fannie with these (going) bad loans but I'm not sure that I can raise my opinion of said politicians far enough to do so.

Is that idiot who made the S&L crisis so much more severe, Fernand St Germain, still lobbying? Or has he thankfully retired?

"Given that we are having a huge debate on whether we can spend another $10 billion a year to provide health insurance to kids, the public would probably be interested in knowing how many trillions Fannie and Freddie might put at risk in an effort to sustain the housing bubble."

In our system of state socialism/corporate welfare debate is inversely proportional to potential benefits to preferred corporations.

SCHIP brings zero privatized profit. Congress has just passed nearly $0.5 trillion Pentagon budget with nary a substantive comment nevermind debate. And the Bush admin will seek $147 billion in the fall to continue the blood bath in Iraq at the hands of the US military, an occupation opposed by nearly 3/4 of Americans.

Trillions for banks would fit neatly into this picture.

Dean

If I understand what you are saying here, and if it's getting the news coverage it is (none), we might as well just quit worrying, get our ear tags and line up at the barn in the morning and evening, enjoying the sunshine until we run out of milk.

Erik L seems misinformed. The MA taxpayers - of whom I am one - are not bailing anyone out.
The legislation is to create a fund of 250mil to allow sub prime borrowers to refinance into fixed 40yr/7.8% mortgages (hardly easy terms). 60 mil will come from taxable bonds sales by Mass. Housing Finance Admin, the rest will come from Fannie Mae. The program will be open to about 1000 households, earning Assuming a refinance of about 350,000 (reflecting MA median home price which has been about $385000-10% paid off), this leaves a monthly mortgage payment of something less than $2400 (median household income in 2006 was a bit less than 54000/yr). Total interest paid at the end of the loan is well over $450,000. I think the main problem is that that monthly payment is still likely to be about 50% of gross take-home for most households, and won't really solve the problem.
MA is also instituting a moratorium on foreclosures while it investigates predatory lending practices.
I wonder why some people are always more angry about the "poor judgment" of the borrowers than the malfeasance of the lenders?

Correction - for some reason the conditions didn't print. The household income cap is $110,000,

I just don't think we should countenance as much as one more twisted sentence from any economist blabbering on about the virtues of capitalism. The United States must be the only country in the Western world that "balances" its phony books on the backs of the poor. I think the game should be declared OVER: Give the kids healthcare and stop all the hypocritical moralizing about "incentivizing" -- the era's new half-assed and vile neologism.

Ron Paul is the ONLY presidential candidate who is unalterably opposed to these government bailouts and ponzi schemes just as he is unalterably opposed to the Iraq war.

Meanwhile watch the gold market. These ponzi schemes will inevitably trash the dollar and send gold surging. But until the markets say ENOUGH IS ENOUGH loudly and clearly this nonsense can only get ever more egregious.

Dean,

Felix Salmon has an excellent article on why this isn't a bailout. He addresses you directly, although to be fair you did not directly say it was a bailout, although your headline insinuates it may be, and for some reason you compare the money we'd spend on SCHIP to the investing of GSEs, which does not involve spending taxpayer money. I'd be very interested to see you address Felix's article.

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