"Commentary"-The Bush Mortgage Mess Bail Out Plan Needs Work
Monday, December 17, 2007SUSIE GHARIB: Tonight's commentator says the Bush administration's plan to help sub- prime borrowers doesn't go far enough. He's Mark Zandi, chief economist at moody'seconomy.com.
MARK ZANDI, CHIEF ECONOMIST, MOODY'S ECONOMY.COM: It's a bailout. That's the refrain from some of the critics of the administration's plan to help certain sub-prime borrowers with either an FHA refinancing or a five- year interest rate freeze. Sub-prime borrowers should have known better than to take on a mortgage they couldn't afford, so say the critics. To rescue them now will only encourage more bad financial decision-making in the future. There are reasons to be critical of the Bush plan, but this isn't one of them. Yes, the plan is a bailout, but it's a bailout we all benefit from. Surging foreclosures threaten to undermine the already fragile housing market, unsettle the volatile global financial system and push the U.S. into recession. Most of us -- not just those with sub-prime mortgages -- will see our household net worth fall as house prices decline nationwide. Some of us -- not just those working in the housing industry - - will lose our jobs as businesses suffering weaker sales and tighter credit pull back on investment and hiring. Not only are sub-prime homeowners severely chastened by the prospects of eviction, but some of the nation's largest mortgage lenders are teetering on the edge of failure and mortgage investors are losing hundreds of billions of dollars.
The lesson for future borrowers, lenders and investors is assuredly not that the Federal government has their back. The problem with the Bush plan is not that it goes too far in bailing out those being hurt. It is that the plan doesn't go far enough. This is Mark Zandi.
