September 23, 2008
Maria Godoy posts a great roundup on why Congress objects to the Bush administration's bailout plan:
In private meetings on the Hill, Paulson and Bernanke have warned lawmakers about the dire consequences of not acting — but these economic Doomsday scenarios have not been spelled out to the public.
Some comments about the article.
Regarding reverse auctions the article says "If the government simply buys the securities with the lowest price, it may end up with $700 billion worth of the worst loans, critics say."
Isn't that the whole point? If the government is going to buy mortgages we want them to buy the worst first.
Those are the mortgages that need to be taking out of the banking system, unpackaged, fixed and resold back into the market as shiny, valuable mortgages.
If there is so much concern that banks and other financial institutions won't have money to lend to good customers, why doesn't the government allow good customers to borrow that 700 billion directly? Why buy "trash" investments from the banks and thus insulate them from their own bad decisions and lack of fiduciary responsibility?
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