Tuesday, September 30, 2008
Prop Up a Bubble?
So banks gave billions in credit to people who could not afford it. Home prices ballooned out of control. We had a bubble that was created by sub-prime lending.
Now that bubble has popped and the value of all those mortgages has tanked. Many home owners ended up upside down, in homes that no longer were worth as much as they where when they purchased them. So they cannot sell and get out. Foreclosure was/is the only option. This is still occurring for many people.
So how is this bail-out going to fix that situation? The market was over inflated. Throwing $700 billion at it will not change that. It might prop up a little bit of the fragments that are still standing but the reality is that the market needs to drop back down to reasonable levels.
Sure the market will dip, but it'll come back up to where it's really supposed to be, which isn't where it was. The market would be smart to be more conservative with it's growth after this blows over.