- May 25, 2002
- Professional Status
- Certified Residential Appraiser
We have nothing to fear but fear itself, a president once said, and thereupon embarked on a series of ad-libs some of which deepened and prolonged the country's depression.
Any debate about a housing bailout can be put aside -- the bailout is underway, even in advance of specific plans being shopped around Washington by Bank of America to prop up home prices with direct subsidies to homeowners whose debt exceeds the value of their houses. No, the perverse effect won't be a replay of the '30s, or even Japan's decade of stagnation in the '90s, but the latter is your model, with a little inflation thrown in. The goal: avoid foreclosures and slow the fall of home prices to market-clearing levels.
Notice that today's bailout will be the opposite of the misnamed S&L bailout of the '80s. Then, only depositors, whose money was guaranteed under federal law, were bailed out. The federal government closed down thrifts, wiped out their shareholders, seized loan collateral and dumped it back on the market, even at firesale prices.