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The Bush Bailout Arrives: Six Quick Thoughts

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First of all, let’s call it what it is: a massive bailout.
Second, let’s see how it works: price controls.
Third, let’s not pretend that this thing will stay as small as it started. When was the last time a government program ever did that? With defaults accelerating in every type of residential mortgage, there will be intense pressure to expand the program. Recall that we’ll very likely have either Hillary Clinton or Barrack Obama in the White House next year, with Democrats continuing to control the House and Senate. Do you still think the parameter’s of the freeze won’t expand?
Fourth, let’s notice that the Bush administration is being just about as dishonest about this as they can get away with. They’re denying it’s a bailout. Denying it operates through price-controls. In fact, they’re denying they had any serious role at all. They just brought the parties to the table. The folks running the Wall Street Journal editorial board pretty much destroyed these lines this morning, before the details of this plan were even released.
Fifth, let’s stop pretending we actually know what the costs of the bailout will be. It’s going to take quite some time to learn exactly how this will all work out. But we’re none too satisfied that the folks putting this together have even asked the right questions much less arrived at persuasive answers. What’s the moral hazard risk that future homeowners will also look for government bailouts? What investors demand as the price for taking on the risk of a bailout in the future?
Sixth, can “Mortgages” be named Time Magazine's Person of the Year?
Bush Touts Subprime Plan Faulted for Coming Too Late [Bloomberg]