Wednesday, October 1, 2008

Suggested Alternative to Congress' Bailout Plan Raises Opinion

A recent OpEd in the Washington Post introduces an alternative to the $700 billion economic rescue package being voted on this week by Congress, suggesting that the U.S. government buys delinquent mortgages to curb home foreclosures and restore stability to the economy. The article, titled the "Trickle Up Bailout," argues that by refinancing home mortgages through the Federal Housing Administration (FHA), with help from government sponsored enterprises Fannie Mae and Freddie Mac, homeowners will experience immediate relief first--rather than powerful financial institutions.

1 comment:

Evan said...

This is an interesting alternative. I would think that the populist, bottom-up approach would certainly be more palatable to voters; and surely, if our elected officials assume we will eventually be able to stomach a socialist approach to governing Wall Street, then they might do well assuming that their constituents would also (eventually) accept the bailing out of everyone else, even the most "profligate" homeowners.

Yet, I can't help but wonder if the editorial skipped over perhaps the most important detail: the assurance that this proposed trickle-up (evaporation?) effect would work better than the trickle-down effect, which is now presumed to be the de facto plan of action. Can we be assured that the bailout of all Americans would lead to a restoration of the credit market? Even if foreclosures did halt immediately, thereby helping homeowners, serious damage has already been done on Wall Street--serious enough, indeed, to seem to warrant the sort of direct intervention the current bailout proposes.

At best, I would say (read: guess) that the proposal in the editorial has as good a chance as working as the bailout. There isn't too much evidence that it would do too much better, and though nobody else seems to want to admit it right now (for good reason), I tend to have faith that the government mulled something like this over and passed, rather than merely racing to throw the life perservers to those drowning on Wall Street. Any other proposal, then, has the responsibility to be unequivocally better than that which is being voted on tonight by the Senate.
I might be wrong to have such hopes, but I sincerely hope not.