“Why a bailout is inevitable”

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The Bush administration’s oft-stated opposition to a housing bailout for lenders and borrowers is under assault from many corners today. The Fed-backed, administration-brokered weekend bailout of Bear Stearns’ debt makes it nearly impossible for the administration to continue to argue against more government aid to borrowers.

Reuters: ‘Federal Bailout of U.S. Housing Gaining Momentum’ ... ‘’There is no question but that there will be a federal bail-out of subprime mortgage loans this year,’ Linda Lord, the top lobbyist for Swiss bank UBS, wrote in a memo last week.’

David Brooks, resident non-liberal at The New York Times: ‘It makes sense to try to find some circuit breakers so the housing market doesn’t totally collapse.... First, no bailout for the true greedheads: the speculators, the flippers, the people who bought second homes they couldn’t afford. Help only those who can stay in their homes with a modest amount of aid. Don’t succumb to lenders who want the government to buy up their bad paper.’

Paul Krugman, one of many resident liberals at The New York Times: ‘Let’s talk about why a bailout is inevitable.... We probably need something similar to the Resolution Trust Corporation, which took over bankrupt savings and loan institutions and sold off their assets to reimburse taxpayers. And we need it quickly: things are falling apart as you read this.’

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Hat tip: Cal
Photo Credit: Treasury Secretary Henry Paulson, by Getty Images