From the NYT (emphasis added)
Quote
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.
The arguments against a bailout are powerful. It would mostly benefit banks and Wall Street firms that earned huge fees by packaging trillions of dollars in risky mortgages, often without documenting the incomes of borrowers and often turning a blind eye to clear fraud by borrowers or mortgage brokers.
If the government pays too much for the mortgages or the market declines even more than it has already, Washington read, taxpayers could be stuck with hundreds of billions of dollars in defaulted loans.
As is the usual case with the U.S.A., we like to do things in a "super" manner. Not satisfied to bailout a single failing lender like the U.K. (Northern Rock), the ideas being proposed in the U.S. are more "Northern Rock on steroids".
On which side of this fence do you sit? Bail 'em out or let 'em burn?