Bush Bailout Plan Strikes at Branches, Not Root of Problem

On Friday, Smart Hippo.com stated that the Bush Administration's plan to bail out subprime borrowers does not address the root causes of the current tragedy.

President Bush on Thursday announced a plan to help an estimated 1.2 million borrowers who risk having their homes foreclosed on when their "teaser" rate period ends and the rates are readjusted. These borrowers will have the options of refinancing their mortgages, having them guaranteed by the Fair Housing Administration, or freezing their teaser rates in place for a five year period.

"It does nothing to address the problems that got us where we are today...A lot of this was fueled by greed -- greed on the part of some consumers who got into loans they knew they couldn't afford, but also greed on the part of certain lenders and borrowers who put short-term financial gain ahead of their customers' best interests...[This is the] beginning of a fundamental transformation which will lead to a more consumer-centric approach to lending based on transparency and accountability. The lenders who understand and embrace this transformation are the ones who will succeed in the long run," said George Favvas, SmartHippo.com's CEO.

Many analysts are outraged by the White House's deal with lenders, which they say violates the sacredness of entering into contracts which then must be honored and is a big step on the slippery slope toward socialism, in which the government controls businesses and property and does so according to its own whims.

Critics of the bailout say that Wall Street will suffer greatly, responsible borrowers will be punished for being responsible, and the mortgage and bond markets will lose prestige and investors' trust, leading to more economic harm than good for the United States and probably higher interest rates for everyone.

They also go on to say that liberty necessitates personal responsibility, and those lenders who made bad loans and those borrowers who took out risky loans trying to get into houses that they should have known they could not really afford deserve what they get under the free market principle "caveat emptor".

Some industry experts cite a general lack of financial literacy among Americans as a fundamental contributing factor in this foreclosure tragedy and say that tools such as the Internet can be and should be used to better educate American consumers.

Other critics are denouncing the bailout plan, which was first conceived of by Treasury Secretary Henry Paulson, as nothing more than a disgusting lie. Many commentators are expecting the plan to fall apart under a barrage of lawsuits.

Original Newswire Source:
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