I’m confused. Today, Bush is proposing aid for people who took advantage of sub-prime lending by freezing sub-prime rates for five years.
People were greedy. They borrowed more money than they could afford so they could buy a McMansion with 4000 square feet of entirely unnecessary space. Why should we bail them out? Isn’t this what got us into this predicament in the first place – extending credit to people who don’t have the credentials to qualify for it?
Likewise, banks and hedge funds who stand to profit the most from rising interest rates shouldn’t be insulated. Sure, it’s great to keep people in their homes. But doing so also ensures that the banks and hedge fund managers will continue to reap their huge year-end bonuses. They’re being rewarded for propagating the sub-prime market. They gambled. They lost and they should lose.
Meanwhile people who borrowed conservatively at standard prime+ rates should be rewarded, with an immediate tax rebate and reduction of interest rate. That will infuse necessary cash into the economy and perhaps allow me to buy that chair at DWR I’ve always wanted.