So we save people from being thrown to the street by cutting rates, rebates, etc...We bail out the bond insurers. So what. So they stay in their house. However, the champagne taste now has a beer pocketbook. The consumer is 70% of our GDP. So what about housing, bond insurers and the like. The consumer will have no choice but to tighten up...
Good point, this is why it is better to let the market take care of the misalloation of resources. People who are in more of a home than they can afford have to sell, they move to one they can afford and are no not so house poor that they can affoprd to still prtcipate in the economy. House prices come down so those who can afford to buy a home in a sustainable way can do so. All these bailouts just prolong the agony and ironically delay economic recovery.