The industry created the bubble and ignored warnings that it would pop and cause economic damage. Why would corporate CEO’s, etc, care if it popped, as long as they got their millions before it did? Attempts to prop up housing are nothing more than attempts to start the music again in a game of musical chairs.

The govt looked the other way even as mortgage fraud was going on. When banks and investors started losing money, suddenly the govt was interested. Instead of bailing out anyone in the industry, congress should instead be investigating which of the players committed fraud or at the very least dug their own hole.

As for buyers or psychology: who among us would believe the govt can figure out in an efficient way to sort out victims of fraud from all the rest? The rest do not deserve a bailout. The victims have been falling for years, and like I said no attention was paid until it was banks and investors complaining.

Enforcement of laws would help. Stricter laws would help only if enforced. Getting rid of lobbying by these industries would help enormously. But some feel-good bailout of anyone is not going to help. It’s a waste of tax payers money and there wouldn’t even be a ‘bailout’ in congress if not for the industry lobbying for it, packaging it as being for consumers, while all the time it’s for the industry.

Mortgage debtors on the other hand get about 1 year to keep staying in the bank’s house… even AFTER the mortgage debtor stops paying their mortgage entirely.

Is this fair?

I think this is the most important point. Lenders will put into the program only mortgages which they think they will lose more by holding than by getting rid of them. I presume the 5 billion CBO projection takes this into account, but that just seems too low a figure, so I’m suspicious.

The reality is I expect there will prove to be almost no bargaining space between the lenders and the FHA. The lenders have been very resistant to taking writedowns, particularly since any losses recognized would indicate they ought to take similar writedowns on other mortgages they hold. They will almost certainly submit mortgages only with the intent of taking the minumun haircut permited (15% or as close to that level as possible).

So yes, there will be perilously few losses because very few loans will be made.

The FHA will be required to examine homeowners, only those residing in the home who are able to service a fixed-rate mortgage will be eligible.

To say that $300 billion is a possible loss is equivalent to saying that the current paper value of all real estate is potentially at risk.

The CBO is not wildly optimistic.

Nearly every economist I’ve read that correctly identifies the root causes of our current problems has been proposing crazy plans that perpetuate those problems, and nearly every other economist has their eyes closed and insists there are no problems.

Meanwhile, Joe Blow on the street has a great grasp of the current situation. A significant majority is even concerned about the strength of the dollar even though all the economists tell us that it doesn’t matter.

I think you are incorrect in saying $300 billion is total of the interest + principal guarantees. For instance, a CNN article said that “The legislation would set aside $300 billion for the FHA to refinance loans.” Thus the exposure to losses on principal is $300 billion; you could have everyone default in 6 months or even 60 months and then you’d take your lumps on foreclosure costs and other losses on principal.

http://money.cnn.com/2008/05/12/news/economy/rescue_plan_details/?postversion=2008051213

If you are going to criticize someone for not having facts right or sloppy writing, you’d better be accurate yourself.