Basically, we know there are a lot of people in US now who can’t sell their houses, because they’ve leveraged themselves for more than the house will sell for on the open market. They have negative networth and selected not to honor their liability, but our government decides that they need a bailout.
So it only makes sense to extend it to the banks, which too leverage themsevles for more than their assets will sell for on the open market. They too will have negative networth and contemplate not honoring their liability(i.e. declare bankrupcy) so they too need a bailout. Only in this case, the government marks up their asset but in the home owner’s case, the government lowers their liability.
My point wasn’t that it’s right. My point was the government has been doing all the nonsense for a while already, it is unlikely the law makers will repent now, given the banks have more lobbying power than the FBs who got the loan remodification.
