One thing I think of is this: Keeping the subprime FBs in their home is an emotional and political issue. However, looking strictly from financial side, the govt prefers an orderly decline of realestate prices.
By doing this the banks don’t suffer immediate losses and the losses suffered over a period of time are mitigated by other types of investments.
They also want to delay or avoid recession. A sudden loss in the financial sector will trigger a recession as 2/3rd of US econony runs on consumer spending.
The govt doesn’t has any vested interested in teh subprime people. Howver, to avoid recession.. the govt needs to keep these people in their homes…
What do you all think? Either way subprime ppl are screwed anyway..
