In business school you are always taught that a 'risk-free' rate of return is whatever the US 3mth  treasury note is paying. I got a A- on a paper I wrote specifically for calling this bullshit - since my position is that there is no metric tracking what the true risk of default on US Treasury notes might be.

Presumably adding $5.3T to the national debt has no impact whatsoever to the risk of default. How convenient.

Memory is a strange bell, jubilee and knell.

This is just another example of how people who play by the rules and take responsibility for their choices always lose in the end. This would not be possible without excessive government intervention, subsidies and bailouts.

My wife and I saved money down for our first home and bought in the city. Not in the nicest area, but on the edge of a pretty rough zone. But we paid cash down, got a fixed rate mortgage, and are doing okay. Just getting by. As are my neighbors are others around us. Why? Because we didn't want to overpay for some mcmansion in the suburbs and be stretched to the breaking point with taxes and a high mortgage bill --- even before the ARM resets.  Now we get to experience the joys of living in the city. Last summer some random arsonist(s) kept torching homes in the vicinity every weekend (once it was two at once, right behind our house). Gang bangers do their thing a few blocks away. We became victims #6, 7 (and 8 if you count my dog who got the worst of it) of some piece of trash's pitbull. I got to meet the boys in blue (or black) while at the clothes donation bin. On the plus side commuting is easier and we get free money from the bottles drunks leave around the neighborhood.

Am I writing my congressperson demanding a tax break on ammo? Or requesting passage of a law that the city cover any property value decline if crime gets out of hand? No. We knew the risks when we signed on the dotted line and my wife and I wanted to be part of the rebuilding of a once great American city. But now I open up the paper on a regular basis and see complaints from people about how they can't afford their organic food and keep their 2nd SUV fueled up. I take the train to work and clip coupons. Where the heck is my free money? Where is my tax break or mortgage write down for doing the right thing?

The way I see it is these types of bailouts just encourage banks (and their customers who should know better) to pull this type of crap in the future. Maybe not this exact scheme but something similar. It will get worse. In the interim inflation has been driven up by all the extra cash pumped into the system. If this keeps up eventually a banking failure is going to happen. Might as well have just dealt with it now and let them fail.

The worst part of this may be the $300 billion to "insure" refinanced mortgages.  On paper, it doesn't look too bad: you re-assess the house's value as it stands today, the buyer proves he can afford to pay a mortgage for 90% of that value, and the lender agrees to accept 85% of the house's value as full payment for the mortgage.  Then, the whole mortgage gets refinanced to a 30 year fixed rate, insured by the government--if the buyer doesn't pay, the government will.  So, hey, what could be wrong with that?

First, the re-assessing of the house's value.  There is no incentive on anyone's part to make this an honest number.  The home assessment industry has shown itself to be less principled than mattress salesmen.

Second, the buyer's proof that he can afford to pay.  We have seen this before; they end up signing forms with values filled in for them.

This is going to blow up in our face, again.  Better to let people who have no business sitting on those houses move out, bear through a year or two of chaos, and then slowly come back to sanity.