Obama's $75 Billion Housing Bailout

But will it really work?

By SHARE

So Obama's plan to save the housing market is out. This sentence from the president's speech really struck me: "Sub-prime loans – loans with high rates and complex terms that often conceal their costs – make up only 12 percent of all mortgages, but account for roughly half of all foreclosures." Again, Washington refuses to point a finger at reckless homeowners. They were just confused, Obama says.  But JP Morgan economist Jim Glassman points the finger at these folks (as well as Wall Street and Washington):

Home buyers? Yes all those folks who bought homes at inflated prices, particularly anyone who bought a home since 2003 … they bear some responsibility too. Rather, they contributed to the inflated conditions in some housingmarkets. But those who took personal responsibility and are living with their obligations—not walking away from the commitments that are the reason for the $1.1 trillion of writedowns of mortgage assets by the global financial industry—they aren’t the culprit. And there are many of them. Those who walked or who took on obligations thinking that rising real estate values would bail them out …they are as much to blame for the housing crisis as Wall Street. Where were the congressional hearings in those days grilling homeowners for gouging new home buyers.[Of course, who is so naïve to need an answer to that question.]

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