The Paulson bailout: Ever thrown away $700 billion dollars?

A few months ago, I got into an argument with a couple of my fellow Walletpop writers. I found myself standing out in favor of a federal fund to help distressed homeowners refinance their mortgages, and my colleagues were arguing (with some justification) that it was unfair to make them foot the bill for other peoples' incompetence.

It was a difficult argument for me; I'm as selfish as the next guy, and I'm not really all that excited about shelling out cash for somebody else's failed mortgage. On the other hand, it seemed to me that defaulted mortgages would lead to a lot of empty homes, plummeting real estate values, failing banks, imploding financial institutions, and so forth. I figured that, if we could keep people in houses and keep them paying mortgages, many of these problems could be averted. Sure, it would be unfair to all the homeowners who played by the rules, not to mention the renters (like me), who won't even benefit from stabilized home values. Still, with the country falling into a hole and the mess splashing everyone, assigning blame wasn't going to get us out.

Even though I rent, this crisis affects me in a variety of ways. For example, my wife works for an engineering firm. If the current banking crisis continues, it isn't hard to imagine a point at which the projects that she works on will go bankrupt from lack of credit. No credit equals no paycheck and, before I know it, we're applying for welfare and emergency assistance. The sad fact is that, even apart from dire predictions of runaway inflation and the collapse of the economy, most of us are only one or two degrees of separation away from the banking mess.