Treasury Secretary Henry Paulson is not normally the first person I'd look to for cogent, well-reasoned analysis, but I have to say his comments on mortgage bailouts are right on.Talking to the Wall Street Journal (subscription required), Paulson referred to many of the aid proposals making the rounds in Washington as "bailouts" for reckless lenders and borrowers: "I don't think I've seen any scenario where the American taxpayer needs to be stepping in with more taxpayer dollars."
He added that "I'm seeing a series of ideas suggested involving major government intervention in the housing market, and these things are usually presented or sold as a way of helping homeowners stay in their homes. Then when you look at them more carefully what they really amount to is a bailout for financial institutions or Wall Street."
Mr. Paulson believes that urging the lenders to cut borrowers some slack is the role the government should play, and I agree. Knock yourself out: if you can talk to the bankers and convince them to play nice, I'm all in favor of it. But don't spend our money bailing out lenders and borrowers, while artificially propping up the housing market.
And I'm still dying for an answer to my lingering question: Why is it bad if someone with no equity in their home loses the home? Is someone who "owns" a home but doesn't have any equity really a home owner?
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