5 thoughts on ““The government’s bailout efforts” on MPR

  1. J Parker

    I’m not an economist, but I love this site. Here’s my question: What would happen if we just reversed the bailout plan? That is what if, instead of bailing out Wall Street, we used taxpayer money to pick up distressed mortgage payments for, let’s say, a year. Wouldn’t that make the mortgages viable and buyable again for financial enterprises to buy?
    Sign me, Naive?

  2. DickF

    It took me a while to get a chance to listen to the whole thing. It was a very good discussion. I do like Russ.
    Russ did make a mistake though. He talked about the government defaulting on bonds they issued. The government will never default on bonds. All they have to do is print money and pay them off. Inflation might go through the roof and the payments might not be worth anything, but there would be no default on the bonds.

  3. DickF

    J Parker,
    Paying loans for a year would do nothing to the value of the homes. Once the year passed the home owners would still be upside down. Their loan would still be larger than the value of the asset.

  4. GNP

    Great discussion! CBC and BBC: take note and feel envious.

    DickF: To nitpick, unexpectedly inflating and decreasing the real value of the bonds is a form of default.

    Fine-tuning the appropriate public support for this mess will ultimately have hard-to-predict distribution consequences in addition to the much discussed moral hazard issues.

    Predictions: 1) The longer Congress deliberates, the greater the negative impact on the real economy; 2) The McCain ticket will suffer no matter how much both parties share responsibility; 3) the study of non-cooperative asymmetric information game theoretic models will enjoy a resurgence in the halls of academia.

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