I think there is no chance that the govt sits back and “lets it burn,” to use Pemeliza’s term.
Yes, there has been some recent talk by the administration, but it’s all about increasing bank regulation, not decreasing stimulus. There will be more stimulus and it will be aimed more at main street to address the (entirely true) perception that the govt bailed out wall street at the expense of main street. So now main street will get theirs.
Mind you this is all happening as economic growth is rebounding, markets are improving, housing prices are rising. Another dip down and any tough talk would be replaced by more huge and desperate stimulus attempts.
I would also remind everyone of the GSE’s new unlimited credit line, which could be used to write down loans or to lower lending standards again. Anyone who is banking on a future flood of foreclosures as a sure thing is making a big speculation imho.
To me, the evidence is overwhelming that the stimulus, bailouts, and easy money will continue for as long as the mkts allow it. Maybe I’m just more cynical than others, but to think that the govt is suddenly going to step back and let this play out flies in the face of all evidence, imho.
