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Wednesday, February 13, 2008

Bankers Plead for Bailout

by Calculated Risk on 2/13/2008 10:39:00 PM

From the WSJ: Worried Bankers Seek to Shift Risk to Uncle Sam

The banking industry ... is urgently shopping proposals to Congress and the Bush administration that could shift some of the risk for troubled loans to the federal government.

One proposal, advanced by officials at Credit Suisse Group, would expand the scope of loans guaranteed by the Federal Housing Administration. The proposal would let the FHA guarantee mortgage refinancings by some delinquent borrowers.
The risk: If delinquent borrowers default on their refinanced loans, the federal government would have to absorb the loss.
This plan makes no sense. Why should the taxpayers bailout the lenders and investors?