The Observation Deck

There is a grass roots movement afoot to counter the proposed bailout of upside-down homeowners and their lenders.

http://www.angryrenter.com

I know there are those on this forum who attribute the housing mess we are in to "predatory lenders." And certainly there were lenders who took advantage of others who may have lacked the sophistication to buy a house. But the three states with the largest foreclosure rates and the biggest home price declines are California, Florida and Nevada. With Arizona a close fourth. I don't have much sympathy for those folks who gambled and lost. They wanted to hit a financial home run and ignored the risks. And now they want the taxpayers to make them whole. I don't think taxpayers should be asked to pay that bill.

Following in that same reasoning, do you have sympathy for the banks or investment companies that gambled and lost? I would think that Bear Sterns etc. are much more sophisticated than even the more educated home owner.

Why should they get bailed out?

Bear Stearns is full of people who believe in Deregulation and Tax Cuts. So they deserve to get bailed out. Their higher ups had already signed contracts, so don't expect them to surrender most of their bigmillions paychecks for the good of the company: they are loyal to their contracts.

The return on investment for the right campaign donations is higher than any direct market mechanism.

Lynne, generally no, I don't think the financial institutions should be bailed out. Certainly not the shareholders. Bear Stearns, WAMU, Countrywide, their equity should be allowed to go to zero. Ditto their bonds. The one caveat would be if in reality an imminent collapse would have caused chain reaction failures, a "panic." That would be catastrophic and should be prevented. Of course that is what Bernanke said was necessary some weeks back when he negotiated the JP Morgan takeover of Bear (and exchanged Treasuries for their crappy paper). We'll never know whether that was really necessary. But why Bear (for example) still has any shareholder value is beyond me. Of course depositors/accountholders should be bailed out up the the FDIC/SIPC limits.