Bank of America's Argument for a Federal Bail Out Is SHEER NONSENSE

An article in the New York Times today reveals that major banks are demanding a government bailout: "Bank of America, which is in the process of acquiring Countrywide Financial and has potentially huge exposure, has circulated a proposal to create a new federal agency that would buy vast quantities of delinquent mortgages at a deep discount and replace them with fixed-rate federally guaranteed loans. The bank warned that tightening credit conditions were leading to 'escalating levels of delinquency and default among borrowers' and 'an unprecedented number' of homes that would enter foreclosure.'" www.nytimes.com/2008/02/22/business/22homes.html

This argument is sheer nonsense. How is increasing credit liquidity related to Mr. Joe being unable to pay his mortgage because long term interest rates are rising? No matter what (unless his payments miraculously drop), Mr. Joe will still default and lose his home. No, adding liquidity to the market will NOT lower Mr. Joe's interest rates. However, what this "bailout" does do is help banks continue to do business by disbursing MORE loans to buyers in order to prop up the current real estate market.

In other words, the banks can't find a buyer for their upside down loans, so they get the government to pay them cash now so they can take it off their books huh? Smart, force the American people to help share the burden for the imprudence of the reckless and greedy on Wall Street. The banks attempts at helping only themselves is so transparent that it's sickening to me.

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