Monday, February 25, 2008

Banks seek bailout in subprime fiasco

From Chris at Americablog.

But don't call it a bailout. John McCain can claim economic ignorance (and he's right) but it was the GOP who ushered in this era of laissez faire economics. This is precisely what he wants to do to the US health care system, as if this would somehow help. Now that the banks have lost billions, guess who is running to Congress, asking for help? Wall Street is sending hordes of lobbyists to set up a tax payer bailout to the industry. Wall Street got themselves into this problem, let them dig themselves out of it on their own dollar. . . .

A confidential proposal that Bank of America circulated to members of Congress this month provides a stunning glimpse of how quickly the industry has reversed its laissez-faire disdain for second-guessing by the government — now that it is in trouble.

The proposal warns that up to $739 billion in mortgages are at “moderate to high risk” of defaulting over the next five years and that millions of families could lose their homes.

To prevent that, Bank of America suggested creating a Federal Homeowner Preservation Corporation that would buy up billions of dollars in troubled mortgages at a deep discount, forgive debt above the current market value of the homes and use federal loan guarantees to refinance the borrowers at lower rates.

“We believe that any intervention by the federal government will be acceptable only if it is not perceived as a bailout of the bond market,” the financial institution noted.

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