Bailout of the Bailout Question...

[LongTimeListener]

Instead of offering rebates to everyone, and bailing out the lenders with bad lending practices, while ignoring the buyers with bad buying habits...

Why doesn't the government mandate an across the board interest rate cut on existing mortgages.....say 50%.

This would continue to allow the banks to profit on existing loans, help many folks continue to be able to pay their mortgages, and act as a great "rebate" for everyone that's not underwater....stimulating the economy.

Thoughts?

[Alan]

I'm not sure that would allow banks to profit on existing loans.

What about "helping" people who decided the most responsible action was to rent instead of buying a house?

[LongTimeListener]

Those people don't need help, they are already have lower monthly expenses...and if they aren't spending their excessive savings now..they never will.

There is already a bail out plan for renters who decided not to buy a house....aren't they called Certificates of Deposit????

[Alan]

I'm a renter and I think I need a bailout. Who are you to tell me that I don't?

[deejayoh]

[rose-colored-coolaid]

I, politely, disagree.

1) Banks would fight this tooth and nail. During a time of bank failures you want to eliminate a highly reliable form of income? Also, they don't just have piles of money, they profit by borrowing for a little and loaning for a little more. If banks had to cut rates 50% they would lose money or the government would have to mandate an across the board slash of interest rates.

2) Even if this passed, it would do little. The banks that held onto bad mortgages are all dying, and much of the bad debt is held by other investors...often foreign investors...

3) Did I mention it's just a terrible idea? Overly low interest rates, pushed by the Fed, were one of the primary causes of the housing bubble in the first place. You don't solve a bubble by causing an identical but even bigger version of the same thing!