President Bush has proposed a massive rescue plan for homeowners, banks and mortgage investors. The government will buy troubled home loans from troubled banks. The plan is audacious in size—at an estimated cost $700 billion. But it is short on specifics. Who’ll get the government’s money and under what terms? Politicians and citizens are debating whether this, the largest bailout in history makes sense.
One group of naysayers runs www.stopthehousingbailout.com. The group says Washington is sending the wrong message, bailing out people who made poor choices or who may have even engaged in fraud. The argument is that by foisting this kind of debt on all taxpayers, the bailout is rewarding those who shouldn’t be rewarded and forcing citizens who made wise decisions about their money to pay the price.
The President says the gravity of the situation makes the bailout necessary. “Failure to act would have broad consequences far beyond Wall Street,” the President said in a statement today. “It would threaten small business owners and homeowners on Main Street.”
Stopthehousingbailout.com also makes the argument that this rescue plan hurts minorities because a larger percentage of whites own homes and will get bailed out. I’m not sure I agree with this argument. I’ve been studying lists of bank-owned properties. Foreclosures seem to be occurring in far larger numbers in black and Latino neighborhoods.
There’s a form letter on the stopthehousingbailout.com site that you can use to send to your local politician.
What do you think of the President’s proposed bailout?
BusinessWeek editors Chris Palmeri, Prashant Gopal and Peter Coy chronicle the highs and lows of the housing and mortgage markets on their Hot Property blog. In print and online, the Hot Property team first wrote about the potential downside of lenders pushing riskier, "option ARM" mortgages and the rise in mortgage fraud back in 2005—well ahead of many other media outlets. In 2008, Hot Property bloggers finished #1 in a ranking of the world's top 100 "most powerful property people" by the British real estate website Global edge. Hot Property was named among the 25 most influential real estate blogs of 2007 by Inman News.