It makes no sense to bail-out the lenders.  A lot of the mess they are in is because they foreclose homes that aren't worth the mortgage, they take the loss and the homeowner loses his or her home.  Bailing out lenders doesn't fix any of this.

What should have been done was a program for the government to BUY THE LOANS that are in default, and give the homeowners either payment terms they can afford or allow the homeowners to REPAY THE LOANS THROUGH PUBLIC SERVICE.  If people are in homes they really cannot afford, then the government should help them sell their home and purchase another home (preferably another home in the program) more within theiir budget.

ATTACK THE PROBLEM NOT THE SYMPTOM.

Such a program would help the lenders by taking bad loans off their books, but also penalize them for holding bad paper.  It would help homeowners to stay in their homes or in homes they can afford.  It would help the housing market because their would be fewer foreclosed homes on the market.  It would help out-of-work homeowners by placing them in public service jobs.  It would reduce the cost of public works projects, military and other public institutions by providing a labor force at reasonable market rates.  The public works jobs could also be in the private sector.  And it would reduce unemployment.

Sometimes we are better off healing the wound than we are just stopping the bleeding.

by rbruck on 09/16/2008 02:24:51 PM EST