Should The Government Bail Out Subprime Lenders and/or Borrowers?

President Bush and Fed Chairman, Ben Bernanke, pictured.

“President Bush outlined his plan Friday for helping troubled subprime borrowers keep their homes. The initiatives target hundreds of thousands of distressed homeowners.
Speaking in the Rose Garden, the president, after highlighting some of the recent stronger economic trends, pointed out the weaknesses in the mortgage market as an area of concern, particularly in the subprime sector.

“The proposals put forward by the president included increasing the help offered by the Federal Housing Authority to troubled borrowers. That may take the form of expanding the pool of borrowers who can apply to the FHA to refinance their loans.

“The president wants to work with Congress to temporarily suspend the tax liability that can take effect when borrowers lose their homes through short-sales, and when lenders forgive mortgage debt. That will enable borrowers to more easily rework their loans.

“I believe we need to change that code,” said the president, “so people won’t be penalized when they refinance their homes.”

“Bush also discussed putting together a coalition of community groups, government agencies and government-sponsored enterprises, such as Freddie Mac to help homeowners refinance onerous loans. That would include making credit available as well as counseling borrowers on credit issues.

TheStateOf . . . Subprime Loans. Most subprime loans were home refinances, which sucks. But I (J) don’t see how it should be the gov’ts responsibility to bail out lenders or borrowers.