BluefoxToday blog : Is the financial bailout plan addressing the wrong issue?

Is the financial bailout plan addressing the wrong issue?

The extensive financial, or housing and mortgage, rescue program in its present form is clearly designed to first lift Wall Street off the mat. Details are still being worked out in Washington on it but that's where its main focus is. Some say that this direction is ill-advised, though. Among the heavy hitters supporting that is the Chairman of FDIC, or Federal Deposit Insurance Corp., Sheila Bair who just voiced her displeasure the other day.

In the center of the dispute is the belief that the key problem now is the number of foreclosures that still keep on rising in many states. If homeowners were able to make their mortgage payments the banks wouldn't be in such a mess and therefore more should be done to help borrowers out. The cycle of defaults begins on the street level and spreads from there up to the lenders and institutional investors. So, pouring billions into wobbly financial institutions is largely missing the point.

There is another point to be made here. Real estate values continue to deteriorate in multiple areas, including in Las Vegas, and is mainly the result of all these foreclosures flooding the marketplace. As values drop, people are more likely to walk away from their homes and the underlying mortgages become less and less valuable and that will hurt banks and mortgage lenders even more.

The argument as a whole does have some merit and ought to be considered as the bailout plan is being implemented. This is no longer only a subprime issue either. An alarming portion of better quality mortgages is now going bad, too.




Provided by: 

Esko Kiuru
Mortgage, real estate and apartment industry analyst - syndicated mortgage, housing and property management blog
My cell: 702-499-1006

Comment balloon 8 commentsEsko Kiuru • October 16 2008 10:24PM


The scary part is that they don't know what to do with the 700 billion. Nobody knows exactly where or what to do with it ---at least I have not heard anything.

Posted by Steven Beam, Parker Colorado Real Estate (RE/MAX Alliance - Parker Colorado Real Estate.) about 10 years ago


I believe they are trying to get out of the hole they made...but they are still buried and it will be a long time before we see any light. I think they need to focus on getting the right people in place to handle these things but of course that takes money and I'm sure they will be looking to cut corners...I hope they aren't saying...ok well we just employed some qualified people at $8 an hour instead of $ we have $699 billion left.

Posted by Neal Bloom, Realtor CRS-Weston FL Real Estate (eXp Realty) about 10 years ago

Since they are printing money like crazy - mortgage rates have gone up. Sort of defeats the purpose.  The bail out is NOT WORKING!

Posted by June Stark, Las Vegas Condos & Luxury Homes Expert (Elite Realty-Luxury Homes & Condos On & Off the Strip) about 10 years ago

Esko - the issue that should be addressed is helping people save their homes not keeping million dollar a year executives in business.

Posted by Lewis Poretz, Mortgage Loan Officer - Lending in 50 States (Bank of England Mortgage) almost 10 years ago


There is a lot of confusion right now as what to do.

Posted by Esko Kiuru almost 10 years ago


The hole these execs were able to dig is mind-boggling.

Posted by Esko Kiuru almost 10 years ago


The bailout so far hasn't convinced too many people. Hopefully as time goes by it'll bring some positive results.

Posted by Esko Kiuru almost 10 years ago


Looks like too much emphasis is being put on saving Wall Street.


Posted by Esko Kiuru almost 10 years ago