Could the 700 Billion Bailout = No Change in the Housing Market?
The general arguments concerning the bailout have gone something along the lines of Anti Bailout : “The taxpayers should not have to foot a 700 billion dollar bill to bail out Wall Street” Pro Bailout : “But if taxpayers do not bail out Wall Street the economy will fall apart and those same taxpayers will be hurt” If we could be sure the bailout would work the second argument has some merit. While the bailout will certainly help the banks, the problem is we have almost no guarantee the bailout will help the real estate market and the general economy. First let’s look at some recent history of how the Fed has tried to help the troubled real estate market. The Fed usually attempts to lower mortgage interest rates to help the real estate market. By lowering mortgage rates houses become more attractive to buyers. In addition, with lower mortgage rates home buyers can buy more expensive houses with the same monthly payment. Therefore lower rates can help stop falling home prices. So it was
