CBS Reporter Suggests a 'Bailout' for Housing Crisis
The âWall Street versus Main Streetâ clichĂ© has infiltrated the mindset of reporters covering the economy. And government action has become the standard push for economic sectors in trouble.
Take CBS correspondent Maggie Rodriguez. On the March 18 âEarly Show,â Rodriguez confronted Treasury Secretary Henry Paulson, suggesting a âcram sessionâ to bail out some homeowners.
âYesterday you mentioned the importance of things that can be done quickly to ease the housing crisis, but you didnât give a deadline,â Rodriguez said. âWouldnât it be worth it, given the gravity of the situation, to sit down with the agencies involved and have a cram session, like you did this weekend to bail out Bear Stearns? Isnât it just as important to bail out homeowners in trouble as it is to bail out an investment giant in trouble?â
Paulson said he thought the government had acted proactively in the wake of the housing crisis.
âMaggie, itâs very important, and the initiatives weâve had that havenât required congressional action â getting the industry together to help homeowners that are in trouble â has been â has made a difference so far,â Paulson said. âOur âHope Now Alliancesâ helped a million homeowners with working it out since we started it up, and weâre working hard with Congress to get legislation.â
As Paulson pointed out on NBCâs March 18 âToday,â the action by the Federal Reserve to facilitate a takeover by J.P. Morgan (NYSE:JPM) of Bear Stearns (NYSE:BSC) was hardly a bailout â due to the shareholder losses and also lost jobs.
â[F]irst of all, let me say that the Bear Stearns situation has been very painful for the Bear Stearns shareholders,â Paulson said. âSo I donât think that they think that theyâve been bailed out here.â
Criticism of government action, however, hasnât been limited to the notion of bailing out homeowners, but the also the move by Fed to rescue Bear Stearns. The Wall Street Journal criticized the move by in a March 17 editorial, claiming any government intervention raises the issue of moral hazard:
âBut with its Sunday move, the Fed is going all in. This raises genuine issues of moral hazard. Commercial banks traditionally have access to the discount window â that is, to public money â because they are regulated and have certain reporting and capital obligations.
Will investment banks and securities dealers now have to meet similar obligations if they tap the window? If they don't, then it's unfair to the banks that do, not to mention the taxpayers who are lending them the money.â