Primed For A Bailout
Government bailouts have been few and far between in recent decades, but the savings and loan industry bailout of the late 1980s was particularly expensive, costing U.S. taxpayers some $200 billion.
As Diana Olick reports, there is now growing talk on Capitol Hill about taking steps to help subprime mortgage borrowers. Three Democratic senators -- Charles Schumer and Hillary Clinton of New York and Christopher Dodd of Connecticut -- have joined community activities in proposing some kind of help to consumers in the wake of the borrowing binge
According to the latest data, some 13% of all subprime loans were delinquent in the fourth quarter of 2006.
Sen. Schumer, in particular, is calling for a relief fund, saying the federal government needs to help people at the "losing end of this mess."
Some lenders, whose bottom lines have been pressured by the subprime mess, are also taking steps, working to refinance subprime mortgages, the large majority of which were refinancings in the first place.
Lisa Rice, National Fair Housing Alliance VP and Todd Sinai, University of Pennsylvania Wharton School associate professor of real estate discuss the bailout issue with Sue Herera.
Rice says the federal governent did not do enough in making sures regulators adequately monitored lending activities, adding that many consumers were not givien full information and were thus caught unaware.
Sinai agrees that more could have been done to prevent fraud and predatory practices and that helping thopse victims might be appropriate but the federal government should not bailout those borrowers who knew the terms and knowingly took the risk.
"We run a real risk of bailing out peole for taking risk," says Sinai "The incentives are very perverse."