Before We Sneak In a Bank Bailout Under the Guise of Helping Homeowners
There is great eagerness these days to craft some sort of bailout for homeowners facing foreclosure. Most of plans involve the government buying up or guaranteeing mortgage debt in situations in which homeowners face foreclosure. However tempting it might be to rush to do something to help homeowners in trouble, can we trouble our crusaders to do a little arithmetic first.
Those who have mastered this arcane craft, which used to be taught in the third grade, know that this bailout will do much more to help bankers who made bad investments than it will to help homeowners.
Okay, here’s the secret – we have a housing bubble. Let’s say that again, we have a housing bubble. That means that house prices are out of line with the fundamentals in the housing market. In many areas houses are still selling for prices that are twenty or even twenty five times what it would cost to rent a comparable house.
