Fundamentally Flawed
I could be wrong, but from what I understand there are two big reasons:
1) Paying off a person’s debt doesn’t fix the bank’s issue of not being able to create new loans for consumers and businesses (i.e. a credit freeze).
Why not? They’re getting the money both ways, only getting it in the form of debt repayments means they can’t charge more interest on existing debt. They still get the money.
2) When a government bails out a bank, the bank doesn’t have a ‘get out of jail free’ card. The banks have to pay all that money back at a high interest rate. It makes more sense for the government to bail out a bank, rather than a person, because they’ll get more of a return on it over time. After the great depression, the government actually made a profit off interest payments from the institutions that were bailed out.
Applying the reason in #2 to an individual home loan, one can quickly see why it wouldn’t be very nice. To a person with a mortgage, all that would change is who they’re writing the check to (the US government), and a much higher interest rate (13-15% instead of 4-6%)
One of Obama’s campaign points was to get a bit of that interest money back into the pockets of taxpayers, since they’re the ones funding the bailout
This is a fair and logical point, I guess I have just lost all faith that this money will be repaid. In my hopeless state, I just believe they have switched to a mode where they will extort as much money as possible before the whole thing goes kaput. I view them as no better than Nigerian scammers at this point. I hope I am wrong.
1 year ago