The Wall Street bailout, publicly estimated to cost taxpayers somewhere between $700 billion and $1 trillion or more, could end up to be bigger than we ever imagined. Now added to the bailout plan: student loans, auto loans, credit card debt, and other “troubled” debt.

The Washington Times reports:

In the dark of night over the weekend when most people were snoozing, the Treasury dramatically expanded its bailout plan to include buying student loans, car loans, credit card debt and any other “troubled” assets held by banks.

The changes, which were included in draft language that also opened the bailout program to foreign banks with extensive loan operations in the United States, potentially added tens of billions of dollars to the cost of the program.

Although it was a major addition to what was already the nation’s largest-ever bailout, it did not become part of the debate between Democrats and the Treasury over details of the program. A Monday counterproposal by Senate Banking Committee Chairman Christopher J. Dodd included such consumer loans as well as mortgages, just as the Treasury’s draft did Saturday night.

“The costs of the bailout will be significantly higher than originally considered or acknowledged,” said Joshua Rosner, managing director of Graham Fisher & Co., who charged that the Treasury and Federal Reserve have not been “forthright” about the ultimate cost to the public. The plan gives Treasury the discretion to buy the non-mortgage loans and securities in consultation with the Fed.

Conservatives cited the move as a sign that the massive plan to take over bad mortgage debt already is opening the door to further government bailouts.

Where is the incentive for me to be a responsible consumer? Not only do I pay my own debt, I pay the debt of others too. Why aren’t financial institutions sucking it up and paying their own way, which is a direct result of poor lending practices (i.e. giving loans/credit to people who didn’t have the ability to pay, and the lenders knew it)?

And doesn’t this bailout basically give financial institutions the green light to continue the same bad lending practices? Why not go ahead and make those loans? The government (taxpayers) will pay for it if (when?) they go bad.

2 Comments

  1. Chad Bordeaux 09/24/2008 at 6:53 am - Reply

    Don’t worry! The government will take care of us! We don’t need to take any personal responsibility! This is great news! I think I will go out this morning and run up my credit card – I have been wanting a Wii and a new jet ski! Obama is going to pay for everything!

    If it were only that simple.

  2. Greg 09/30/2008 at 6:56 pm - Reply

    You are absolutely right! That idea removes borrower responsibility and creates inflation. I’m a mortgage broker in Wisconsin, and what’s amazing to me is that rates are still low. Why would they be so low if there was such a problem with liquidity in this market? See Current Wisconsin mortgage rates online.

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