Wizard of Changes -- ©cdozo 2004 to 2015 (cdozo) wrote,
Wizard of Changes -- ©cdozo 2004 to 2015

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Who Are They Bailing Out?

What the government is doing with the financial meltdown bailout is purchasing the bad debt that financial institutions took on when they bought bundled debt packages that included subprime loans. The bailout is going to the financial institutions. The people who got suckered into taking out the mortgages they couldn't afford will still lose their homes.

It would be better if the bailout money went into an account that would help those people with their mortgage payments. Maybe it could be used to reduce the interest rate, reduce their payments and/or extend their payment period.  That way the bad debts would get paid off, the debts that the financial institutions are holding would no longer be considered risky and the people would not lose their homes.

Plus payments from the people whose homes are being saved would help to pay back the debt that the government is incurring in the bailout.

The way it is now, the tax payers pay for the bailout, the financial institutions benefit by getting money from the government to cover risky bets they took and lost,and the banks get to repossess the homes and then sell those home again (and again and again...).

There is no reason to only bail out the financial institutions. They took a bad bet when they should have known better and they lost. The problem is that by losing, they put everybody's money at risk, so the government has decided to bail them out. But why only them? The bailout should include the little folks, the people who were talked into taking on more debt than they could afford and are now defaulting on their mortgage payments. In many cases, they stand to lose everything. But when they bought their homes, they were not nearly as aware of the risk as the financial institutions were.

My plan would help both the both the individuals and the financial institutions. And at the same time it would reduce the impact on us taxpayers caught in the middle.
Tags: investing, politics

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