No one here should be surprised if this comes to pass, or some other bailout like it. Most voters own homes, and people who own things much prefer the market prices of what they own to go up, not down, even if it has other consequences down the road. Politicians will do whatever a predominant majority of voters want. It’s as simple as that.
Voters don’t support bailouts because they buy into the economic benefit arguments. Those arguments just provide a justification or cover for what they really want – immediate relief from the consequences of their irresponsibility.
Politicians and the rest of the political community (including people like Greenspan) don’t all buy into the economic benefit arguments of a bailout either. Ultimately, they don’t care about what bank CEOs or other bigwigs want either. They just want to do whatever it takes to remain powerful members of their community, and they will do whatever they think will keep them there. Ultimately, that means getting the support of a majority of voters, or getting support from a pol that gets that.
Bottom line: We as a country will get the quality of government reaction to this problem that the majority of voters want and deserve. So far, that’s even more depressing than I’d expected.
If and when price drops bite homeowners more deeply, the bailout plans will become stronger and, to many posters here, more outrageous. We can raise righteous anger at the obvious inequity, and possible economic inefficiency, but
we can’t really be surprised.
