And the Foreclosure Crisis? The financial crisis is one symptom of the foreclosure crisis. The bad assets are largely bad mortgages, and when they go bad, it means Wall Street loses some money, yes, but it also means a family loses their home. And though ensuring Wall Street's survival is a definite priority, it's extremely hard to argue that elite investors who made bad bets in order to reap big profits deserve public help while ordinary homeowners who entered into bad mortgages on the strength of bad advice merit nothing. The terms of this bailout, however, actually make it easier to imagine a policy that could aid these folks. As Dean Baker says, "The government will inevitably come into the possession of a vast amount of mortgages in various stages of delinquency. The priority in these cases should be to allow people to remain in their homes, not maximizing the return on the mortgages. This should mean first a good faith effort to negotiate a write-down that makes it possible for homeowners to remain in their house as owners. If this proves impossible, then the next recourse should be to give homeowners the option to remain as renters paying the market rent for the house. Only if the homeowner can neither arrange a new mortgage nor pay the market should the government move ahead with foreclosure procedures." For the government to protect Wall Street by buying these mortgages but abandon Main Street once it owns them would be obscene.
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