Does the mortgage crisis demand a government bailout?
A year ago, most experts thought not. Sad as the situation was for some homeowners, many experts felt the problem would be confined to those who had gambled on risky loans with eyes open — borrowers who chose adjustable-rate loans sure to require higher payments later, lenders who invented exotic loans likely to suffer high default rates, hedge funds and other big investors who had lusted after high-yielding mortgage-backed securities. But things have changed. The mortgage crisis is behind a nationwide drop in home values and a crisis in confidence that is impeding all types of lending. People who did not choose to take risks are suffering, and more and more experts now say some sort of government response is necessary to avert a deep and prolonged recession. “Now it’s our problem, and it isn’t getting any better. As we speak, it is getting worse,” says Wharton finance and real estate professor Susan M. Wachter, who warned a year ago that the subprime mess could push the economy into
